Schuette Files Felony Racketeering and Fraud Charges Against Chesapeake Energy Corp.

Contact: Joy Yearout 517-373-8060

June 5, 2014

LANSING – Michigan Attorney General Bill Schuette today announced the filing of additional criminal charges by his Corporate Oversight Division against Oklahoma-based Chesapeake Energy Corporation for charges of racketeering and fraud for victimizing private land owners across northern Michigan.

"I will defend and protect the taxpayers of Michigan in the face of fraudulent business practices," said Schuette.  "Scamming hardworking Michigan citizens is not how we do business in this state."

The complaint filed by Schuette alleges that Chesapeake directed their agents to recruit multiple landowners across Northern Michigan to lease their land to Chesapeake the summer of 2010.  Allegedly, landowners often notified the agents of existing mortgages on the land to be leased, and the agents allegedly indicated the mortgages would not be an obstacle. When competition from competitors stopped, Chesapeake – through its leasing agents including OIL Niagaran and shell corporation, Northern Michigan Exploration – allegedly cancelled nearly all the leases, using mortgages as the purported basis for the cancellation.  Schuette alleges Chesapeake therefore obtained uncompensated land options from these landowners by false pretenses, and prevented competitors from leasing the land.

Schuette filed the following charges against Chesapeake in Cheboygan District Court on Thursday, June 5, 2014:

  • One count of Conducting Criminal Enterprises, a felony punishable by a fine up to $100,000;

  • Eight counts of False Pretenses, $1,000 to $20,000, a felony punishable by a fine of $10,000 per count, or three times the value of the money or property involved, whichever is greater.

Representatives from Chesapeake are scheduled to be arraigned on June 25, 2014 at 10:30 a.m. before Cheboygan County's 89th District Court.

Attorney General Bill Schuette's case on Chesapeake Energy and their alleged crime against Michigan landowners remains ongoing.  Schuette encourages those who may have been victims of Chesapeake to contact his Corporate Oversight Division toll-free at 877-765-8388. 

Background on Chesapeake v. State of Michigan

Chesapeake already faces criminal charges filed by Schuette in March 2014 for alleged anti-trust violations with regard to private land leasing in the summer of 2010, and the state land auction held by the Department of Natural Resources in October 2010.  During the DNR's May 2010 auction, both Chesapeake and Encana purchased natural gas leases in Michigan.  In 2012, the Reuters news agency uncovered a possible conspiracy between the two companies' executives discussing an agreement following the May 2010 auction to split up Michigan counties where each company would be an exclusive bidder for both public and private leases.

In the five month period following the state's May 2010 auction, this alleged conspiracy may have been a key driver behind the state-held land lease price in Michigan going from $1,510 per acre in May 2010 to less than $40 an acre at the October 2010 auction and for private leasing to stop.    

Schuette filed one count of anti-trust violation and one count of attempted anti-trust violation against Chesapeake Energy Corporation on March 5, 2014 in Cheboygan County.  On May 9, following a week-long preliminary examination, Schuette filed one additional count of anti-trust violation based on evidence presented during the preliminary exam.  Judge Maria Barton has not yet issued a ruling on whether the case will be bound over to circuit court and set for trial.

A criminal charge is merely an accusation, and defendants are presumed innocent until and unless proven guilty. Click here to view a copy of the complaint.