REFILE-Michigan AG charges Chesapeake with racketeering and fraud

Thu Jun 5, 2014 12:13pm EDT
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(Refiles with correct Chesapeake Energy company code in first paragraph; CHK.N, not CNK.N)

By Brian Grow and Joshua Schneyer

ATLANTA, June 5 (Reuters) - Michigan's attorney general filed felony racketeering and fraud claims against Chesapeake Energy Corp. on Thursday, alleging the company canceled hundreds of private land leases under false pretenses following a short-lived oil and gas boom in the state in 2010.

The charges, filed in Michigan state court in Cheboygan, allege Chesapeake, through its leasing agents, victimized private landowners in northern Michigan by falsely claiming mortgages on their properties were a legitimate basis for the lease cancellations. Landowners were previously told the mortgages were not a problem, the state alleged.

"I will defend and protect the taxpayers of Michigan in the face of fraudulent business practices," Michigan Attorney General Bill Shuette said in a press release. "Scamming hardworking Michigan citizens is not how we do business in this state."

A Chesapeake spokesman did not immediately respond to a request for comment.

A felony complaint filed by the Attorney General charges Chesapeake with one count of "conducting a criminal enterprise," punishable by up to a $100,000 fine, and eight counts of "false pretenses," punishable by a $10,000 fine each or three times the value of money or property involved, whichever is greater.

Schuette alleged that, as a result of leasing the oil and gas rights on Michigan landowners' properties then cancelling the deals, "Chesapeake therefore obtained uncompensated land options from these landowners by false pretenses, and prevented competitors from leasing the land."

Chesapeake allegedly signed lease with as many as 800 Michigan landowners, but only honored 30 leases, the state alleged.

Chesapeake is scheduled to be arraigned on the charges in Michigan state court in Cheboygan on June 25. (Reporting By Brian Grow and Joshua Schneyer)