McClendon Recruits Top Lawyer for Securities Inquiry
Chesapeake Energy Corp. (NYSE:CHK) CEO Aubrey McClendon has recruited a top defense lawyer to represent him in a securities regulatory inquiry into the $1.3 billion in personal loans he took out against the company, according to a Reuters exclusive. Marvin Pickholz, a partner with Duane Morris and a former assistant director of enforcement with the Securities and Exchange Commission, is counseling McClendon in connection with the inquiry into loans he obtained from an investment firm doing business with Chesapeake.
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Specifically, the SEC will be trying to determine whether the loans posed a conflict of interest, or should have been disclosed to shareholders. The loans made by EIG Global Energy Partners allowed McClendon to take advantage of a special perk allowing him to as take as much as a 2.5 percent stake in every well drilled by Chesapeake each year. McClendon used his well stakes as collateral for the loans.
Reuters reported on the loans in April, shortly after which the SEC launched its inquiry.
Pickholz, a frequent legal commentator on TV news programs, was a key prosecution witness in the trial of Martha Stewart on obstruction of justice charges stemming from an insider trading investigation. Pickholz also wrote a book on securities crimes published by Thomson Reuters’ WestLaw division.
While any legal ramifications are yet to be determined, McClendon has already been hit closer to home as shareholders presure Chesapeake’s board to overhaul company management and strategy. In May, the company said it would replace McClendon as chairman (he would remain in his role as CEO) and appoint an independent lead director. The board also voted to end the Founder Well Participation Program, through which McClendon receives his well stakes, in June 2014.
The board has also launched its own independent investigation into all the financial transactions between McClendon and firms that have done business with Chesapeake. And on Monday, the company gave billionaire activist investor Carl Icahn and O. Mason Hawkins of Southeastern Asset Management the authority to name four independent directors to the company’s nine-member board.
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