NEW YORK, May 7, 2012 (GLOBE NEWSWIRE) -- On April 26, 2012, Pomerantz Haudek Grossman & Gross LLP filed a federal securities class action (5:12-cv-00465-W) in the United States District Court, Western District of Oklahoma, on behalf of all persons who purchased Chesapeake Energy Corporation ("Chesapeake" or the "Company") (NYSE:CHK) common stock between April 30, 2009 and April 17, 2012, inclusive (the "Class Period"). This class action is brought under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against the Company and Chief Executive Officer and Chairman of the Board Aubrey K. McClendon ("McClendon").
If you are a shareholder who purchased Chesapeake common stock during the Class Period, you have until June 25, 2012 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Rachelle R. Boyle at firstname.lastname@example.org or 888.476.6529 (or 888.4-POMLAW), toll free, x237. Those who inquire by e-mail are encouraged to include their mailing address and telephone number.
Chesapeake was co-founded by Defendant McClendon in 1989. The Company is a leading natural gas producer, and has very aggressively promoted the use of fracking to extract previously unrecoverable reserves.
While McClendon currently owns roughly 1.35 million shares of Chesapeake stock (presently worth approximately $24 million), this interest is dwarfed by McClendon's share of Chesapeake's oil and gas wells pursuant to the Company's Founders Well Participation Program (the "FWPP"). Due to large up front development and operating costs, McClendon's FWPP interests are significantly underwater and have yet to generate any positive cash flow. Unbeknownst to Class members, starting in 2009, McClendon leveraged all of his FWPP interests in order to pay for their costs. He not only secured non-recourse loans on his ownership interests in the wells, but also secured personal loans in excess of $500 million from EIG Global Energy Partners, a hedge fund that engaged in financing transactions with Chesapeake.
As a result, by year end 2011, McClendon had amassed personal debt on Chesapeake related wells, and from Chesapeake business partners, exceeding $1 billion. The size of the debt and McClendon's leveraging of all his FWPP related interests, represented material undisclosed risks to Chesapeake investors.
It was not until April 18, 2012 that these matters were widely reported by Reuters and The Wall Street Journal. Chesapeake shares plummeted $1.06 (from $19.12 per share)—a 5.5% decline representing over $500 million in market value losses.
On April 26, 2012, Chesapeake abruptly terminated the FWPP program, and Board members disclaimed any knowledge of the size of McClendon's indebtedness. On May 1, 2012, Chesapeake announced that it would replace McClendon as its Chairman.
On May 2, 2012, Reuters reported that for four years McClendon had a $200 million hedge fund that traded in the same commodities that Chesapeake produced. The fund, Heritage Management Company, LLC was started by McClendon and the Company's co-founder Tom Ward and used the Company's Chesapeake's headquarters in Oklahoma City as its mailing address. In discussing potential conflicts of interest, Reuters cited a veteran trader who worked at the hedge fund and noted that McClendon "engaged in 'near daily' communications and 'exhaustive' calls to help direct the fund's trading." The article also quoted Jeff Harris, former CFTC chief economist: "If the company needs to make an operating decision which might move the market against the CEO's positions, there's a risk that will influence the decision-making at the top of the company."
Following this report, McClendon expressed that he was "deeply sorry for all of the distractions of the past two weeks."
Chesapeake shares closed May 4th at $17.39 per share, a decline of 9% since the initial revelations.
The Pomerantz Firm, with offices in New York and Chicago, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, the Pomerantz Firm pioneered the field of securities class actions. Today, more than 75 years later, the Pomerantz Firm continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of defrauded investors. See www.pomerantzlaw.com.
CONTACT: Rachelle R. Boyle Pomerantz Haudek Grossman & Gross LLP email@example.com
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