Natural gas giant Chesapeake Energy, led by the now-embattled tycoon Aubrey McClendon, colluded with a competitor to keep land prices down and avoid bidding wars over lucrative energy deposits.
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In emails between Chesapeake and Encana Corp, Canada's largest natural gas company, the rivals repeatedly discussed how to avoid bidding against each other in a public land auction in Michigan two years ago and in at least nine prospective deals with private land owners here.
In one email, dated June 16, 2010, McClendon told a Chesapeake deputy that it was time "to smoke a peace pipe" with Encana "if we are bidding each other up." The Chesapeake vice president responded that he had contacted Encana "to discuss how they want to handle the entities we are both working to avoid us bidding each other up in the interim." McClendon replied: "Thanks."
That exchange – and at least a dozen other emails reviewed by Reuters – could provide evidence that the two companies violated federal and state laws by seeking to keep land prices down, antitrust lawyers said.
"The famous phrase is a ‘smoking gun.' That's a smoking H-bomb," said Harry First, a former antitrust lawyer for the Department of Justice. "When the talk is explicitly about getting together to avoid bidding each other up, it's a red flag for collusion, bid-rigging, market allocation."
The emails are the latest in a series of blows that have devastated the second-largest natural gas company in the country. The company board stripped McLendon of his chairmanship after it was revealed he took out more than $1 billion in loans without disclosing the transaction. Both the IRS and the SEC have launched investigations into the company, not to mention a Justice Department probe for possible violations of the Clean Water Act.
Chesapeake and McClendon were well known for their aggressive tactics. McLendon funneled millions of dollars into the Sierra Club and the American Lung Association to push for natural gas subsidies and expensive regulations on coal-fired power plants.