Benefits

ERISA Suit Filed Against Chesapeake Energy

June 20, 2012 (PLANSPONSOR.com) – Chesapeake Energy Corporation is now facing an Employee Retirement Income Security Act (ERISA) lawsuit. 

By Rebecca Moore editors@plansponsor.com | June 20, 2012

Zamansky & Associates, LLC filed a class action lawsuit on behalf of all employee and former employee participants in the Chesapeake Energy Corporation’s Savings and Incentive Stock Bonus Plan. The lawsuit was filed in the United States District Court for the Western District of Oklahoma and covers all current and former employees of Chesapeake Energy Corporation who purchased or held company stock in the Plan from July 31, 2008, to the present.   

The lawsuit alleges that the plan’s fiduciaries failed to manage and administer the assets with the care, skill, prudence, and diligence of a prudent person; failed to disclose material information to the plan’s participants; and engaged in activities inconsistent with, and detrimental to, the plan and its participants.   

Since April, Chesapeake has been the subject of a dozen lawsuits, alleging securities fraud, corporate waste and breach of fiduciary duties owed to shareholders, the law firm said. The lawsuits arise out of revelations about CEO Aubrey McClendon, his perks and compensation, and certain business strategies he pursued to his own benefit and the detriment of the company.   

McClendon took $1.1 billion in loans against personal stakes in the company’s oil and gas wells he obtained under the Founder’s Well Participation Program. To bail himself out of financial problems, and maximize his own gains, McClendon pursued an aggressive expansion strategy for Chesapeake and piled on enormous debt through off-balance sheet arrangements that were not disclosed on the company’s balance sheet. He also borrowed from firms that also transacted business with Chesapeake, creating huge conflicts of interest.   

McClendon additionally ran a $200 million hedge fund that traded in the same commodities that Chesapeake produces from the company’s offices.  

Last month another law firm launched an investigation into ERISA violations concerning the retirement plan’s investments in company stock (see“Chesapeake Energy Facing ERISA Investigation”). 

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