Chesapeake Energy Corp. (NYSE: CHK) CEO Aubrey McClendon has received loans totaling $1.1 billion in the last three years backed by his share in Chesapeake’s wells. Under the terms of his employment contract, McClendon may take up to a 2.5% interest in every well that the company drills. Neither McClendon nor Chesapeake has disclosed the loans to shareholders.
According to an exclusive report at Reuters, McClendon uses the borrowed funds to as operating funds to support his share of the wells:
The size and nature of the loans raise questions about whether McClendon’s personal financial deals could compromise his fiduciary duty to Chesapeake investors, experts who reviewed the documents told Reuters.
McClendon and the company deny any conflict of interest, and McClendon told Reuters, “There are no covenants or obligations in my loan documents or mortgages that bind Chesapeake in any way.”
Chesapeake’s shares are down about -2.5% at the market open this morning, at $18.65, a new 52-week low. The 52-week high for the shares is $35.75.