May 2 - Chesapeake Energy's stock tanks despite CEO Aubrey McClendon's assertion that recent reports about his personal, financial dealings contain ''misinformation''. Sasha Salama reports.
PLEASE NOTE: THIS EDIT CONTAINS 4:3 MATERIAL The co-founder of Chesapeake Energy, Aubrey McClendon, is apologizing for the controversy clouding the company's horizon. Chesapeake is the nation's second biggest producer of natural gas, and McClendon is Chairman and CEO. He's calling recent reports about himself "misinformation". His comments followed several Reuters reports which found that McClendon ran a lucrative, 200-million dollar hedge fund from 2004-2008. The fund traded in the same commodities that Chesapeake produces. A clear conflict of interest says John Coffee, Director of Columbia Law School's Center on Corporate Governance. SOUNDBITE: JOHN COFFEE, PROFESSOR OF LAW, COLUMBIA UNIVERSITY (ENGLISH) SAYING: "Chesapeake is the second largest producer of gas and thus it knows which way the market is going ahead of the market as a whole. And, as a result, he would be able to sell short in a period of oversupply even as his company is losing money because the price of gas is falling. That's problematic because no company wants to see its CEO making money as its shareholders lose." And stockholders are losing. Shares of Chesapeake suffered their worst decline in more than three years Wednesday amid the turmoil stemming from McClendon's personal financial dealings and following yesterday's worse than expected results. Chesapeake said Tuesday it plans to replace McClendon as chairman and bring to an early end a controversial program that gave him stakes in each of the company's wells. Reuters has found McClendon took out as much as $1.1 billion in personal loans, using his well stakes as collateral. The well program has now come under the scrutiny of the U.S. Securities and Exchange Commission and the IRS. And there could be further fallout for Chesapeake's corporate board. SOUNDBITE: JOHN COFFEE, PROFESSOR OF LAW, COLUMBIA UNIVERSITY (ENGLISH) SAYING: "I expect the shareholders are not going to be happy with this board and that we're going to see the major proxy advisors recommend an infusion of new directors." In fact, Chesapeake's biggest shareholder, Southeastern Asset Management, says it plans to have discussions not only with the company's board, but with management and third parties as well. Sasha Salama, Reuters.