OKLAHOMA CITY – A well-known oil executive has been charged by a federal grand jury.
On Tuesday, the Department of Justice announced that Aubrey McClendon was charged with conspiring to rig bids for the purchase of oil and natural gas leases in northwest Oklahoma.
The indictment claims that McClendon orchestrated a conspiracy between two large oil and gas companies to not bid against each other for oil and natural gas leases in northwest Oklahoma.
The conspiracy allegedly ran from December 2007 to March 2012, during which time he was CEO of Chesapeake Energy.
Investigators claim the conspirators would decide ahead of time who would win the leases.
The winning bidder would then assign an interest in the leases to the other company.
Former United States Attorney for the Western District of Oklahoma, Robert McCampbell, gave us an insight on what this means next for the former CEO.
“It’s a lot easier to talk about it than it is to prove all this in court beyond a reasonable doubt,” McCampbell said. “There are lots of perfectly innocent explanations for why a company would not pursue a particular lease, something as simple as their geologist didn’t think it was a good place to drill for example.”
Officials claim McClendon instructed his employees to execute the agreement, which included withdrawing bids for certain leases and agreeing on the allocation of interests in the leases between the conspiring companies.
“While serving as CEO of a major oil and gas company, the defendant formed and led a conspiracy to suppress prices paid to leaseholders in northwest Oklahoma,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division. “His actions put company profits ahead of the interests of leaseholders entitled to competitive bids for oil and gas rights on their land. Executives who abuse their positions as leaders of major corporations to organize criminal activity must be held accountable for their actions.”
Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine.
“To prove a conspiracy like this is brutally difficult and the government is just going to have a lot of work to do if they’re really going to prove all of this beyond a reasonable doubt,” McCampbell said.
Chesapeake released the following statement after the indictment was handed down:
“Chesapeake has been actively cooperating for some time with a criminal antitrust investigation by the Department of Justice regarding past land leasing practices and has received conditional leniency under the Antitrust Division’s Leniency Program. Chesapeake does not expect to face criminal prosecution or fines relating to this matter. Chesapeake has taken significant steps to address legacy issues and enhance legal and regulatory compliance throughout the organization.” – Gordon Pennoyer
McClendon retired from Chesapeake in 2013.
McClendon responded to the indictment late Tuesday evening:
“The charge that has been filed against me today is wrong and unprecedented. I have been singled out as the only person in the oil and gas industry in over 110 years since the Sherman Act became law to have been accused of this crime in relation to joint bidding on leasehold. Anyone who knows me, my business record and the industry in which I have worked for 35 years, knows that I could not be guilty of violating any antitrust laws. All my life I have worked to create jobs in Oklahoma, grow its economy, and to provide abundant and affordable energy to all Americans. I am proud of my track record in this industry, and I will fight to prove my innocence and to clear my name.” – Aubrey McClendon
“The Justice Department has taken business practices well-known in the Oklahoma and American energy industries that were intended to, and did in fact, enhance competition and lower energy costs and twisted these business practices to allege an antitrust violation that did not occur. In response to criticism of their past charging practices and in the name of a new policy to be tough on individuals, the prosecutors have wrongfully singled out Aubrey McClendon and have wrongly charged an innocent man. A charge is one thing. Proving the case is another. Starting today, Aubrey gets his day in court where we will show that this prosecutorial overreach was completely unjustified.” – McClendon’s lead lawyers Abbe Lowell of Chadbourne & Parke and Emmet Flood of Williams & Connolly