Chesapeake CEO sued by shareholder over loans

Reuters Business News
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Posted: Apr 20, 2012 8:38 AM
Chesapeake CEO sued by shareholder over loans

(Reuters) - Chesapeake Energy Corp <CHK.N> Chief Executive Aubrey McClendon has been sued by a shareholder who cited a Reuters report showing that he had borrowed as much as $1.1 billion against his stake in thousands of company wells.

The loans, taken out over the past three years, were previously undisclosed to shareholders, analysts and academics said, and raised concerns about potential conflicts of interest. McClendon and the company say there is no conflict.

Court documents showed that the lawsuit, filed in the District Court Of Western District Of Oklahoma, was brought by Deborah Mallow IRA SEP Investment Plan. The lawsuit also named several Chesapeake directors as defendants.

The loans were used to fund McClendon's operating costs for an unusual corporate perk giving him the opportunity to take a 2.5 percent interest in every well the company drilled, the Reuters report said.

McClendon in turn used the stakes as collateral on those loans, loan documents filed in five states showed.

The case is In re: Deborah G Mallow IRA SEP Investment Plan vs. Aubrey McClendon, et al., District Court, Western District of Oklahoma. No: 5:12-00436

(Reporting by Tanya Agrawal and Swetha Gopinath in Bangalore; Editing by Ted Kerr)