Antitrust Law Daily Wrap Up, RACKETEERING NEWS: Additional felony charges filed against Oklahoma-based Chesapeake Energy Corporation for “cold drafting” scheme, (Jun 6, 2014)

By Greg Hammond, J.D.

Additional criminal charges have been filed against Chesapeake Energy Corporation for engaging in racketeering by participating in criminal enterprises through and the crime of false pretenses in relation to the victimization of private land owners across northern Michigan, the state’s Attorney General—Bill Schuette—announced (Michigan v Chesapeake Energy Corporation, June 4, 2014).

As previously reported, the Michigan Attorney General’s office announced the filing of criminal charges against Chesapeake and Encana Oil and Gas USA in early March 2014, alleging that the two companies collaborated to avoid bidding against each other on public auctions and private negotiations for oil and gas leases in Michigan. The Attorney General’s Corporate Oversight Division alleged that the supposed conspiracy may have caused the state-held lease price in Michigan to drop from $1,510 per acre in May 2010, to under $40 per acre in October 2010.

Additional felony charges. According to the new felony complaint, Chesapeake convinced hundreds of landowners in Northern Michigan to enter into natural gas leases in 2010, falsely representing that the landowners’ existing mortgages would not be an obstacle to the leases. However, the company ordered mass lease cancellations, based largely on the landowners’ existing mortgages, after competition stopped and Chesapeake determined that oil and gas prospects were not lucrative enough. The complaint alleged that out of the 700-800 natural gas leases, Chesapeake honored less than 30 of them.

Consequently, the Corporate Oversight Division filed a nine count complaint against Chesapeake, including one count of conducting criminal enterprises and eight counts of false pretenses. The felony of conducting criminal enterprises is punishable by a fine of up to $100,000, according to the Attorney General. In addition, the use of false pretenses that causes a conveyance of land having a value between $1,000 and $20,000 is punishable by the greater of a fine of $10,000 per count or three times the value of the money or property involved.

“I will defend and protect the taxpayers of Michigan in the face of fraudulent business practices, stated Schuette. “Scamming hardworking Michigan citizens is not how we do business in this state.”

Companies: Chesapeake Energy Corp.; Encana Oil and Gas USA

News: RICO Antitrust