July 5, 4:42 p.m.: This post has been updated.

The last four months have been rather bumpy for Chesapeake
Energy Corp., the nation’s second-largest natural gas company behind Exxon
Mobil.

Starting in April, Reuters took aim at the company’s
flamboyant chief executive, Aubrey McClendon, in a series of articles, prompting
his ouster as company chairman (he remains CEO) last month at the behest of
disgruntled shareholders. The revelations also triggered an
SEC probe.

The company was rocked anew last week when the news agency disclosed
a series of email exchanges in which McClendon and other Chesapeake executives
appeared to collude with officials at EnCana Corp., Canada’s largest natural
gas company, to suppress the price of land leases in Michigan.

Reuters reported
on Monday that the Justice Department has launched a probe into whether these communications
violated laws against price fixing.

As a prominent player in the national debate over hydraulic
fracturing, Chesapeake was hardly a stranger to controversy even before the
Reuters investigation. Last May, ProPublica reported
that Chesapeake was fined
more than $1 million by Pennsylvania state officials — the largest fine
the state had issued to an oil and gas company — for contaminating water
supplies in Bradford County.

The company’s business practices earlier came under
criticism when it emerged in mid-2009 that Chesapeake’s board gave
McClendon a $112.5 million pay package in 2008 even as the company’s stock dropped
58 percent amid slumping natural gas prices. The contract, which included a $75
million bonus and other generous perks, was brokered as McClendon staved off a
personal financial crisis by selling
off approximately $552 million worth of Chesapeake shares over a three-day stretch
to cover margin calls.

Shareholders expressed their displeasure with the generous compensation
package, the
highest awarded to any Fortune 500 CEO in 2008, by suing Chesapeake. In
2011, as
part of a settlement, McClendon agreed to buy back a collection of antique
maps sold to the company for $12 million under the 2008 plan. Today, the
52-year-old, who owns a 19 percent stake in the NBA’s Oklahoma City Thunder,
has an estimated net
worth of $1.1 billion.

Here are some of the key findings from the recent Reuters
series:

·
McClendon failed
to disclose up to $1.1 billion in personal loans borrowed against his share
of company oil and gas wells under a unique company program that gave the
former chairman a 2.5 percent stake in the profits of thousands of drilled
wells. The program has since been dropped. (First indication of the loans came in a story by the Pittsburgh Post-Gazette, which reported in March that a Chesapeake affiliate run by McClendon was mortgaging its stake in oil and gas leases in West Virginia.)

·
For a time, McClendon operated
a $200 million hedge fund that traded in oil and gas contracts. Experts have
called this problematic since insider knowledge that McClendon gained as head
of Chesapeake could have helped boost his personal profits at the expense of the
company. Tom Ward, Chesapeake’s co-founder and McClendon’s hedge fund partner, has
denied there was a conflict of interest. “We did not use any proprietary
knowledge of (Chesapeake) trades to make our own individual decisions,” he told
Reuters. Forbes
has more on the potential breach of duty created by the fund, the existence
of which wasn’t disclosed to shareholders.

·
According to Reuters, top officials at
Chesapeake and EnCana exchanged emails between June and October 2010, discussing
ways to avoid bidding against each other at a Michigan public land auction
in order to keep land prices down. The emails discussed dividing up counties to
acquire land without competing against each other. McClendon, according to the
story, wrote in an email to a subordinate that it was time “to smoke a peace
pipe” with EnCana executives “if we are bidding each other up.”

Reuters reported that it was unclear whether the rival
energy giants “consummated any collusive agreements,” but an analysis of the
auction results showed that “neither company bought any land in the same county
as the other.”

A spokesman for Chesapeake had no comment regarding Reuters’
findings or the reports about the Justice Department investigation. A Justice
Department spokesman declined to comment on the findings. In a June 25 press
release, EnCana officials stated that an investigation into the collusion
matter had been “immediately initiated.”

In the event of criminal prosecution, the potential
consequences are substantial. Under the Sherman Antitrust Act, price fixing is
a felony, punishable by fines of up to $100 million for companies and $1
million for company officials.

The scrutiny of Chesapeake’s corporate practices comes
during a prolonged slide in natural gas prices, which reached their lowest
levels in
a decade in April. Chesapeake has a projected cash flow shortfall this year
surpassing
$10 billion.

The spotlight on the company isn’t going away: on Monday, Bloomberg
reported
that over its 23-year history, Chesapeake had paid just $53 million in income
taxes on $5.5 billion in pretax profits, a rate of about 1 percent, thanks to a
rule that allows U.S. oil and gas producers to postpone payments to account for
the inherent costs of well drilling.

Update: This story has been updated to include a link to a March 2012 Pittsburgh Post-Gazette story.