Exclusive: Chesapeake board member lent money to CEO McClendon

Fri Apr 27, 2012 4:39pm EDT
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By Brian Grow and Anna Driver

(Reuters) - As Chesapeake Energy Corp.'s board of directors moves to distance itself from loans taken by CEO Aubrey McClendon, documents reviewed by Reuters show that at least one former board member had undisclosed personal financial ties to him in the past.

Now-retired board member Frederick Whittemore lent money to McClendon in the late 1990s, the documents show, even as Whittemore helped determine how much the CEO should be paid to run Chesapeake.

This week, the energy giant reversed an earlier statement that its board was "fully aware" of up to $1.1 billion in personal loans that McClendon has taken in the last three years. "The board of directors did not review, approve or have knowledge of the specific transactions engaged in by Mr. McClendon or the terms of those transactions," the company said.

In June 1998, documents filed in Oklahoma County court show, McClendon had a financial relationship with Whittemore, a veteran Wall Street executive who served on Chesapeake's board from 1993 until 2011. For all eighteen years on Chesapeake's board and at the time of the loan, Whittemore served on Chesapeake's compensation committee. In that capacity, he helped determine how - and how much - McClendon would be paid. He also served as a member of the corporate governance and audit committees.

Whittemore, now 81, did not respond to messages left at his office and home.

Ron Hutcheson, McClendon's personal spokesman, acknowledged the existence of the loan but said the deal between Whittemore and McClendon ended in March 1999. He did not say whether the debt was repaid.

Provided with a copy of the financing documents and asked for comment, former Oklahoma governor and current Chesapeake director Frank Keating said in an email that he would "refer this to our legal team for review and response as appropriate."

Although nearly 14 years old, the McClendon-Whittemore deal raises a number of concerns, some analysts said. Among them: whether a board member who helps determine McClendon's salary should have a separate, private financial relationship with the CEO he oversees.   Continued...

Chief Executive Officer, Chairman, and Co-founder of Chesapeake Energy Corporation Aubrey McClendon walks through the French Quarter in New Orleans, Louisiana March 26, 2012. REUTERS/Sean Gardner