Chesapeake, Tom Ward Sued by Shale Owners for Alleged Scheme

(Bloomberg) - Chesapeake Energy Corp., the company Aubrey McClendon built into a natural-gas giant, was sued along with his former partner by lease holders who say the pair conspired to rig bids for drilling rights during the shale boom.

The lawsuit against Chesapeake and  Tom Ward comes four months after a federal grand jury indicted McClendon on March 1 for allegedly fixing shale lease auctions. McClendon died a day later, at age 56, when the SUV he was driving slammed into a bridge in Oklahoma City, where he lived and worked.

The suit, brought by Chisholm Partners LLC and its investors, accuses Chesapeake and Ward of working together to artificially lower prices while McClendon led his company and Ward was chief executive officer at SandRidge Energy Inc. The plaintiffs are seeking at least $30 million in damages in the lawsuit filed July 13 in a federal court in Kansas City, Kansas.

“Chesapeake along with the defendants and SandRidge, between them, illegally ‘divided up’ the geographic area covering the Anadarko Basin Region in Kansas, and other states, and agreed not to compete and drive up prices," according to the suit.

Messages seeking comment from Oklahoma City-based Chesapeake and Ward weren’t returned. McClendon, before his death, maintained his innocence in the federal case. Ward, in a March 29 interview with Bloomberg, declined to discuss any legal matters related to McClendon, though he also noted that drillers sometimes worked together during the boom.

The two friends founded Chesapeake in 1989. Ward, 56, left the company in 2006 and built SandRidge into a $10 billion firm at the height of its market value, while McClendon grew Chesapeake to more than three times that size at its peak.

Chesapeake shares slid 2.4 percent to $4.49 at 12:02 p.m. in New York trading. SandRidge, which declared bankruptcy in May, fell 5.6 percent to less than 2 cents.

The case is Pacific Oil and Gas LLC v. Chesapeake Energy Corp., 160-cv-02498, U.S. District Court, District of Kansas (Kansas City).


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