Shares of Chesapeake Energy are cheap enough, nowadays, to attract a number of new investors. But for alot of years, the company was run like it was CEO McClendon's personal slush fund.
For some of its egregious practices, Chesapeake has been featured a number of times on footnoted.com. The company has also been featured thanks to what appears to be enormous wealth transfers from its shareholders to its CEO. While outside investors including Carl Icahn have now improved oversight, investors should heed Warren Buffett's warning: "There's never just one cockroach in the kitchen."
Skeletons In The Closet
Though it's clear from the behavior we do know about that McClendon cares little for long-term shareholder value, the scary part, now, are the problems we don't know about. Yesterday, however, shareholders got a hint that there are likely many more skeletons in the closet, for which shareholders may have to pay dearly.
McClendon appears to have been caught colluding with fellow energy firm Encana (ECA) in keeping land prices low. During a bidding war for land containing energy resources, McClendon sent an e-mail that included the following statement to his deputy: "Doug: time to smoke a peace pipe with ECA on this one if we are bidding each other up."
It's too early to tell what the penalties (if any) will be for Chesapeake's nefarious activities, but does anyone believe this is the last of the cockroaches?
Disclosure: No position