Chesapeake Energy To Stand Trial On Racketeering, Fraud Charges

Chesapeake Energy will go to trial on racketeering and fraud charges.

A Cheboygan District Court judge announced on Tuesday that there is enough evidence to take the Michigan Attorney General's second criminal case against Chesapeake to a trial.

Gordon Pennoyer, a spokesman for Chesapeake, stated the decision was "not unexpected given that the Attorney General's burden was substantially lower than he will be required to prove at trial."

Specifically, what Attorney General Bill Schuette will be trying to prove is that, back in 2010, agents for Oklahoma City-based Chesapeake recruited landowners in northern Michigan to enter into leasing contracts, which Chesapeake then canceled months later for bogus reasons.

Schuette claims Chesapeake orchestrated this alleged fraud, as part of an overarching scheme to keep competitors from getting a foothold in what, at the time, was looking like the next great shale play -- the Collingwood shale formation. Prosecutors say, it was when competitors' interest in the land faded that Chesapeake dumped the contracts.

In a statement today, Schuette said, “We will uncover fraud wherever it exists and hold the perpetrators accountable, on behalf of the hardworking citizens of Michigan. We are confident in our case and prepared for trial.”

Chesapeake is also confident in its position. On behalf of the company, Pennoyer stated, "We continue to believe the Attorney General is attempting to criminalize basic contract disputes. Chesapeake remains focused on moving past these legacy issues from 2010 and executing our business strategies to drive profitable growth through financial discipline and the efficient development of our world-class assets.”

Earlier this summer, the same judge also bound Chesapeake over for trial for allegedly rigging bids in a Michigan public land auction, also in 2010. That trial is scheduled to begin December 2.