Chesapeake faces new racketeering charges over state exploration leases

A new set of allegations has been lodged against the troubled Chesapeake Energy Corp, who is already fighting antitrust charges in Michigan over bids on gas exploration rights. According to Michigan Attorney General Bill Schuette in a statement today, the second-biggest US natural gas producer has tied up landowners in 2010 by telling them that existing mortgages were not a hindrance to leasing their properties out. Later on, Chesapeake used the same mortgages as the reason for canceling almost all of the leases after competition has ceased for them. Chesapeake has been charged with racketeering and fraud.

"Chesapeake, therefore, obtained uncompensated land options from these landowners by false pretenses and prevented competitors from leasing the land," the attorney general said.

Schuette revealed that the charges were filed today in Cheboygan state court. The town, which is in Michigan, lies on the northern edge of the state's Lower Peninsula. He also added that representatives of the natural gas company need to make an appearance at an arraignment scheduled on June 25.

Bloomberg said that a single racketeering charge filed against the company is considered a felony. The charge is punishable by law, and if found guilty, could be fined as high as $100,000. Aside from the racketeering charge, Chesapeake also faces eight counts of false pretenses, which each count subject to a $10,000 fine or three times the value of money or property involved, whichever is higher.

The antitrust charge that was lodged earlier against the company for its collusion with Encana Corp, carries as much as a million dollars in penalty. Chesapeake lawyers have since denied the antitrust allegations and has withdrawn from the exploration auction in Michigan.

In an emailed message to Bloomberg, Chesapeake spokesman Gordon Pennoyer dismissed the allegations and said, "This action has no merit and we will vigorously contest these baseless allegations."

Tags

Chesapeake Energy Corp, Michigan Attorney General Bill Schuette, Chesapeake mortgage lease fraud, Encana Corp

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