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Permalink Reply by Philip Brutz on February 17, 2015 at 5:46am

http://www.reuters.com/article/2015/02/17/us-chesapeake-mcclendon-l... 

Chesapeake alleges founder McClendon stole 'trade secrets' to start new firm

By Brian Grow

OKLAHOMA CITY Tue Feb 17, 2015 11:14am EST

Former CEO and Co-founder of Chesapeake Energy Corporation Aubrey McClendon walks through the French Quarter in New Orleans, Louisiana in this file photo taken on March 26, 2012.

Credit: Reuters/Sean Gardner

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OKLAHOMA CITY (Reuters) - Chesapeake Energy Corp filed suit Tuesday alleging that its founder and former chief executive, Aubrey K. McClendon, stole confidential company data during his last months on the job in order to launch his new oil and gas empire.

McClendon, 55, "misappropriated highly sensitive trade secrets from Chesapeake" and "subsequently used these trade secrets for the benefit of" a company he founded in 2013, American Energy Partners LP, according to the civil complaint filed by Chesapeake in Oklahoma County District Court.

In the suit, Chesapeake claims McClendon asked his assistant to print maps and data about unleased acreage and that McClendon also sent himself blind copies of the same documents at a personal email address during his last months at the company. The company says it discovered McClendon's actions through a forensic analysis of his Chesapeake email account.

Chesapeake alleges that the information was used by McClendon and American Energy Partners to acquire drilling rights on land in the Utica Shale formation in four separate transactions.

In a statement, McClendon characterized the lawsuit as "baseless" and said his severance agreement with the company included "the right to own and use this information." He said he intends to contest the lawsuit "vigorously."

The suit represents the latest drama in the very public falling out between McClendon and Chesapeake, the company he co-founded in 1989 and built into the second largest natural gas producer in the United States. During his tenure at Chesapeake, McClendon was hailed as a visionary who helped pioneer the drilling technique known as hydraulic fracturing, or fracking.

In 2012, a series of Reuters investigations found that McClendon had taken but not publicly disclosed $1.55 billion in personal loans from a major financier of the company. He helped run a hedge fund to personally trade oil and gas. And emails reviewed by the news agency showed McClendon collaborated with a rival firm in a bid to suppress land prices in a prospective oil and gas play in Michigan.

Although an internal investigation of his activities found no "intentional" wrongdoing, McClendon agreed to step down as CEO on Jan. 29, 2013.

"Approximately thirty-six hours after the announcement of his departure," Chesapeake alleges in its complaint, McClendon began to take confidential company information.

Among the documents were "open acreage reports" about the Utica Shale formation, an oil and gas play in Ohio, Chesapeake alleges. The reports, which Chesapeake claims were confidential and expensive to compile, contain information about unleased land that the company was "pursuing and seeking to acquire," the suit contends.

As part of his employment agreement, McClendon was allowed to invest in each of Chesapeake's wells. When he left the company, McClendon retained those stakes, which were characterized as "jointly owned interests," and his separation agreement spells out information to which he is entitled.

Chesapeake alleges that McClendon strayed far beyond the bounds of the agreement. "Open acreage which has not even been acquired is, by definition, not 'jointly owned'," according to Chesapeake's complaint. The company contends McClendon had no right to take that information

"We believe that pursuing these legacy claims is in the best interest of the company and its shareholders," Chesapeake spokesman Gordon Pennoyer said in a statement.

According to the suit, McClendon "used and disclosed Chesapeake's trade secret and confidential information" to solicit investors for his new endeavor even as he served as a Chesapeake director and CEO in February and March 2013. "These investors knew or should have known that McClendon owed a duty to Chesapeake to maintain the secrecy of the information," the lawsuit claims.

Seven months after McClendon left Chesapeake, a Utica-focused affiliate of his American Energy Partners issued an announcement: the unit had raised $1.7 billion in equity and debt commitments from investment firms. The money would be used to acquire 110,000 acres in the Utica and launch drilling operations, according to a company news release.

McClendon's backers include Energy & Minerals Group, a Houston-based investment firm run by John Raymond, which has invested more than $3 billion. EMG and other investors could now become entangled in the litigation. Raymond could not immediately be reached for comment Tuesday.

In addition to American Energy Partners, three affiliates and McClendon Energy Operating, Chesapeake's complaint names "John Doe Investors 1-20" as defendants. McClendon is not named as a defendant in the complaint because resolution of disputes between him and Chesapeake requires arbitration, according to his separation agreement.

Chesapeake is seeking an unspecified amount of damages for alleged violations of the Oklahoma Uniform Trade Secrets Act and other state statutes. Chesapeake also is asking the Oklahoma County court to force McClendon's company to place "all income earned from their Utica Shale play acquisitions" in a trust. Chesapeake contends that any income earned by American Energy Partners resulted from "the use of Chesapeake property and the usurpation of Chesapeake's corporate opportunities."

(Additional reporting by Anna Driver in Houston, Joshua Schneyer and Michael Erman in New York. Edited by Blake Morrison and Michael Williams)

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Permalink Reply by Philip Brutz on February 17, 2015 at 12:12pm

http://www.forbes.com/sites/christopherhelman/2015/02/17/chesapeake...

Chesapeake Sues McClendon, Alleging Theft Of 'Trade Secrets'

Today Chesapeake Energy sued American Energy Partners, the new company created by its embattled former CEO Aubrey McClendon. The complaint, filed in Oklahoma County District Court, alleges that in his waning days as CEO of Chesapeake, McClendon squirreled away massive amounts of data, containing “highly sensitive trade secrets.” After his departure from Chesapeake, in April 2013, McClendon set up his new company, American Energy Partners, and leveraged that data to make a series of deals to snap up more than 100,000 acres across the Utica shale play. According to Chesapeake’s complaint, “these purchases involved the same acreage evaluated in the data stolen by McClendon.”

According to the complaint:

“McClendon committed this theft by requiring his assistant to print highly sensitive maps and prospect data, which he took with him as he left Chesapeake. He also included a blind carbon copy to his own private e-mail account on e-mails which contained the same highly sensitive and valuable information.”

Chesapeake alleges that even before McClendon was gone from the company — pushed out after extensive revelations of self-dealing, conflicts of interest and even what prosecutors say was collusion with the head of a rival firm — he was using his possession of confidential information to lure in investors for his new venture. Chesapeake is seeking the return of all confidential data as well as payment of compensatory and punitive damages.

Since he founded AEP, McClendon has reeled in and deployed more than $7 billion in capital, using it to acquire acreage in the Utica, Marcellus, Woodford and Permian plays. Most of the equity, roughly $3 billion, has come from Houston-based Energy & Minerals Group. AEP has also issued billions of dollars in debt.

McClendon responded to the allegations in an email to reporters today, basically saying that Chesapeake is just chewing on sour grapes. McClendon, as one of his perks since the time he founded the company in 1989, until his departure, had the opportunity to invest alongside Chesapeake in every well it drilled. As a result he was and continues to be Chesapeake’s biggest partner, with a personal working interest in thousands of wells. Among the terms of his deal to leave Chesapeake, the company agreed to continue give him information on all these wells.

According to McClendon’s statement:

·         Mr. McClendon was entitled to own and use the information in his possession by contractual right;

·         Mr. McClendon’s agreement with the company clearly gives him broad and deep information rights consistent with past practices;

·         Chesapeake has given Mr. McClendon almost 20 terabytes of information in accordance with the terms of the Separation Agreement; and

·         Mr. McClendon has paid Chesapeake nearly $2.5 billion in connection with the jointly owned properties and is still a working interest owner in more than 16,000 Chesapeake wells, making him the company’s single largest partner.

McClendon stated that not only is he entitled to have and use all the information he has, but that Chesapeake had welched on its end of the deal by refusing to hand over information on wells for which he has paid more than $100 million for his share of drilling expenses.

“It is beyond belief that the company that I co-founded 25 years ago and where I worked tirelessly to build it into one of America’s largest and most successful oil and gas producers has now decided to add insult to injury almost two years to the day after my resignation by wrongly accusing me of misappropriating information. Under my agreements with Chesapeake, I am entitled to possess and use the 20 terabytes of information I own. It is a sad day to see Chesapeake stoop so low as to sue its co-founder for having information that was earned, paid for and provided through my contracts with Chesapeake.”

For AEP’s first big acquisitions, in late 2013, McClendon spent about $1.7 billion to acquire 100,000 acres in the core of the Utica play.

That may have seemed like a lot to start with, but McClendon was only getting started. In February 2014 hsa acquired 200,000 acres in the Oklahoma Woodford (with 6,000 bpd of production) for nearly $700 million. June 2014 he acquired 75,000 acres and 175 million cubic feet per day of production in the Marcellus and Utica for $1.75 billion. Also that month he acquired 63,000 acres in the Permian basin with 16,000 bpd of production, for $2.5 billion. He has also deployed about $500 million to acquire non-operated working interests nationwide.

In hindsight, it has become clear that McClendon, and AEP, acquired much of this acreage at the top of the market. According to data from U.S. Capital Advisors, shares of company dedicated to the Utica are down 30% in over the trailing 12 months, while the Marcellus is down 27%, the “Mid Con” (rough analog to the Woodford) is down 43%. The Permian is a relative bright spot, down just 1% in the past year. Given American Energy Partners high amount of leverage, it will be quite some time before McClendon’s private equity backers can expect a return on their investment.

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Permalink Reply by 0ym9x5ag7ury2 on February 22, 2015 at 11:16am

Now if we can just get Aubrey to testify to the Dept Of Justice on how CHK is stealing from landowners across the US, maybe the landowners could get some justice as well as fair payment for what has been taken.

I know how they are stealing thanks to the CHKs Revenue Dept sending me a copy of the Spreadsheet used to arrive at Buck Well 1H Puny royalty payment.

In order to make sure the truth gets out, I've shared the spreadsheet with most everyone.

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Permalink Reply by Billy Park Whyde on February 22, 2015 at 2:51pm

Sharks eating Sharks this might get interesting!

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Permalink Reply by Philip Brutz on February 22, 2015 at 2:55pm

Just like watching an old Dallas rerun.

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