chesapeake.jpg
chesapeake.jpg A Chesapeake Energy natural gas well site is seen near Burlington, Pa.
(File photo | Associated Press)
LANSING, MI – Leasing agents for Chesapeake Energy Corp. misled private land owners in a ruse that locked out other oil companies from competing for their oil and gas leases in the summer of 2012, Michigan Attorney General Bill Schuette said in criminal charges filed Thursday, June 5.
The felony charges, filed in Cheboygan County, follow an earlier series of charges in which Schuette accused the Oklahoma-based company of a bid-rigging conspiracy with Encana that allegedly kept lease prices artificially low in an 2010 auction held by the Department of Natural Resources.
The new charges include one count of conducting criminal enterprises, or racketeering, a felony punishable by a fine up to $100,000, and eight counts of false pretenses, a felony punishable by a fine of $10,000 per count, or three times the value of the money or property involved, whichever is greater.
“I will defend and protect the taxpayers of Michigan in the face of fraudulent business practices,” said Schuette in a press release. “Scamming hardworking Michigan citizens is not how we do business in this state.”
In a written statement, Chesapeake spokesman Gordon Pennoyer called the charges “baseless allegations” and vowed the company would vigorously contest them. The company will be arraigned on the charges in Cheboygan County on June 25.
Schuette alleged Chesapeake directed its agents to recruit multiple landowners across Northern Michigan to lease their land to Chesapeake the summer of 2010.
"Allegedly, landowners often notified the agents of existing mortgages on the land to be leased, and the agents allegedly indicated the mortgages would not be an obstacle," Schuette said.
"When competition from competitors stopped, Chesapeake... allegedly cancelled nearly all the leases, using mortgages as the purported basis for the cancellation."
In March, Schuette filed charges against Chesapeake and the U.S. arm of Canadian-based Encana Corp., alleging the two companies conspired to split up the upper Lower Peninsula between themselves to avoid bidding against each other in state-run auctions for leases on state-owned land.
In May, Schuette reached a civil settlement with Encana, in which the company agreed to pay a $5 million fine, pleaded “no contest” to one misdemeanor charge and agreed to cooperate with prosecutors in the case against Chesapeake.
The settlement will put $2.5 million in funds managed by the state Department of Natural Resources and another $2.5 million to fund the Attorney General’s anti-trust enforcement activities.
On the anti-trust charges against Chesapeake, Judge Maria Barton has not yet issued a ruling on whether the case will be bound over to circuit court and set for trial.
RELATED: Encana reaches $5 million bid-rigging deal with state, Chesapeake Energy still on the hook
Jim Harger covers business for MLive/Grand Rapids Press. Email him at jharger@mlive.com or follow him on Twitter or Facebook or Google+.