Chesapeake Energy to face racketeering charges in Michigan trial

Tue Sep 9, 2014 12:56pm EDT
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By Joshua Schneyer

Sept 9 (Reuters) - Natural gas and oil producer Chesapeake Energy Corp must face trial on charges of felony racketeering and using false pretenses related to its land-leasing practices, a state judge has ruled.

Cheboygan District Court Judge Maria Barton ruled on Monday that Oklahoma-based Chesapeake go to trial on one charge of racketeering and 20 counts of using false pretenses to allegedly defraud private landowners in the state during an oil and gas leasing boom in 2010. Barton ruled after a hearing last month. No trial date has been set.

State Attorney General Bill Schuette brought the charges against Chesapeake in June, alleging the company directed its leasing agents to lock up land positions in the state by offering signing bonuses to private landowners.

Later, when Chesapeake's competitors in the region slowed down their leasing, Chesapeake's agents allegedly canceled the deals, claiming that mortgages on the properties were grounds for not honoring the deals after earlier assurances that would not be an issue.

As a result, Chesapeake obtained "uncompensated land options from these landowners by false pretenses, and prevented competitors from leasing the land," the state charged.

In a statement, Chesapeake said it believes the charges are without merit and expects to prevail at trial.

"We continue to believe the Attorney General is attempting to criminalize basic contract disputes," said company spokesman Gordon Pennoyer. "Chesapeake remains focused on moving past these legacy issues from 2010 and executing our business strategies to drive profitable growth."

The criminal charges against Chesapeake followed a 2011 investigation by Reuters into the company's land-leasing tactics during a speculative leasing boom in the northern part of the state during 2010, including its use of a shell company to cancel land deals with more than 800 private landowners.   Continued...