Chesapeake Accused of Hiding Costs of Executives' Jet Use
By Edvard Pettersson-May 9, 2012 9:54 AM ET
A Chesapeake Energy Corp. (CHK) shareholder accused the company of underreporting the use of company corporate jets by executives and directors for personal travel.
The shareholder, Gilberta Norris, filed a so-called derivative lawsuit yesterday in Oklahoma state court on behalf of the natural-gas supplier against its board, including Chairman and Chief Executive Officer Aubrey McClendon. Norris accuses the directors of breach of fiduciary duty by misleading shareholders about the true cost of personal use of company aircraft.
In the redacted, public copy of her complaint, Norris said she had asked to see Chesapeake’s books and records, which revealed “the true extent and the true cost of personal travel on the company’s aircraft.”
“Given that personal use comprised such a high proportion of total use, the board never had any basis for withholding from shareholders the large fixed costs of the aircraft,” Norris said. If the fixed costs had been included, “the true costs of personal use of the aircraft would have increased by close to an estimated $10 million a year,” she said.
Michael Kehs, a spokesman for Oklahoma City-based Chesapeake, declined to comment on the complaint.
“We haven’t seen the lawsuit but will address in the proper forum when we receive the complaint,” Kehs said today in an e-mail.
Chesapeake shares have fallen amid concern that McClendon’s private loans and deals conflict with his professional duties. They dropped as much as 53 cents, or 3.1 percent, to $16.40 today in New York Stock Exchange composite trading.
The directors said May 1 that they will strip McClendon of the chairman’s post and are conducting an internal review of his personal transactions. The Securities and Exchange Commission opened an informal inquiry last week, the company said.
In a derivative suit, any recovery would be returned to Chesapeake’s coffers rather than awarded to individual shareholders.
The case is Norris v. Aubrey McClendon, CJ-2012-2751, District Court of Oklahoma County.
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