The Exchange

Aubrey McClendon: Hedge Fund Manager?

Shares of Chesapeake Energy (CHK) were getting thumped Wednesday after the company reported weaker than expected quarterly results and new questions arose about CEO Aubrey McClendon.

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Reuters, which has been leading the way in reporting on McClendon and his business arrangements for the past two weeks, including the news in mid-April regarding his sizable loans secured by his interests in company-owned wells, now says that he was also in the recent past running a $200 million hedge fund in his off hours. While that's certainly not something you hear about every day for a person managing a publicly traded company, Reuters also says that the fund was focused on trading in energy commodities. Chesapeake is of course a company that exists to drill for oil and natural gas.

The report says that for at least the years 2004 to 2008, McClendon was closely involved with Heritage Management Company LLC, a fund he started with Chesapeake co-founder Tom Ward. The report notes that there is "no evidence that McClendon or Ward used inside knowledge gleaned from Chesapeake in their hedge fund trading," though the article's writers indicated that "experts on energy trading, corporate governance and commodity-market regulation said they were stunned by the latest revelation."

A search conducted on FactSet of Chesapeake's annual filings with the Securities and Exchange Commission for those years turned up no mention of Heritage. On a conference call Wednesday morning, which had been scheduled and planned some time ago to discuss Chesapeake's earnings, McClendon said some of the reports in recent days contained "misinformation."

Chesapeake's stock was as low as $15.86 earlier in the session, a level it last saw in the spring of 2009. Recently, it had rebounded to $17.06, though that was still down 13% on the day, on trading volume that was much heavier than normal.

In light of the reporting, earlier this week Chesapeake said McClendon's well agreement would be brought to a close in June 2014, a year and a half before it had been scheduled to expire. The company also said it would split the chairman and CEO roles, both of which McClendon holds, leaving him as chief executive.

What's your take? Is Chesapeake taking appropriate steps with regard to McClendon? Have they gone too far or not far enough? Weigh in.

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