HOUSTON (Reuters) – Chesapeake Energy Corp will find an independent, nonexecutive chairman to replace Aubrey McClendon, who will retain his position as chief executive officer, the natural gas producer said on Tuesday.

McClendon, who is Chesapeake’s co-founder, also agreed to an early end to a controversial program that grants him minority stakes in Chesapeake’s wells, a perk that had sparked investor anger and inquiries from U.S. regulatory and tax agencies.

Shares of Chesapeake were up 8.5 percent at $20.01 in morning trading on the New York Stock Exchange after rallying as much as 11 percent in the opening minutes.

Chesapeake’s moves came less than two weeks after Reuters reported that McClendon had taken out as much as $1.1 billion in personal loans with his well stakes as collateral, an arrangement that analysts and academics said posed potentially serious conflicts of interest.

Most of the money was lent by EIG Global Energy Partners, an investment management firm that is also a big source of financing for Chesapeake itself.

The well program has also come under the scrutiny of the U.S. Securities and Exchange Commission and the Internal Revenue Service. Chesapeake’s board said last week that it planned to negotiate an early termination of the plan.

The IRS probe, included in an SEC filing on Monday, had previously not been disclosed to shareholders.

By Brian Grow and Anna Driver

(Reuters) – As Chesapeake Energy Corp.’s board of directors moves to distance itself from loans taken by CEO Aubrey McClendon, documents reviewed by Reuters show that at least one former board member had undisclosed personal financial ties to him in the past.

Now-retired board member Frederick Whittemore lent money to McClendon in the late 1990s, the documents show, even as Whittemore helped determine how much the CEO should be paid to run Chesapeake.

This week, the energy giant reversed an earlier statement that its board was “fully aware” of up to $1.1 billion in personal loans that McClendon has taken in the last three years. “The board of directors did not review, approve or have knowledge of the specific transactions engaged in by Mr. McClendon or the terms of those transactions,” the company said.

In June 1998, documents filed in Oklahoma County court show, McClendon had a financial relationship with Whittemore, a veteran Wall Street executive who served on Chesapeake’s board from 1993 until 2011. For all eighteen years on Chesapeake’s board and at the time of the loan, Whittemore served on Chesapeake’s compensation committee. In that capacity, he helped determine how – and how much – McClendon would be paid. He also served as a member of the corporate governance and audit committees.

Whittemore, now 81, did not respond to messages left at his office and home.

Ron Hutcheson, McClendon’s personal spokesman, acknowledged the existence of the loan but said the deal between Whittemore and McClendon ended in March 1999. He did not say whether the debt was repaid.

April 27 (Reuters) – As Chesapeake Energy Corp.’s (CHK.N: Quote, Profile, Research) board of directors moves to distance itself from loans taken by CEO Aubrey McClendon, documents reviewed by Reuters show that at least one former board member had undisclosed personal financial ties to him in the past.

Now-retired board member Frederick Whittemore lent money to McClendon in the late 1990s, the documents show, even as Whittemore helped determine how much the CEO should be paid to run Chesapeake.

This week, the energy giant reversed an earlier statement that its board was “fully aware” of up to $1.1 billion in personal loans that McClendon has taken in the last three years. “The board of directors did not review, approve or have knowledge of the specific transactions engaged in by Mr. McClendon or the terms of those transactions,” the company said.

In June 1998, documents filed in Oklahoma County court show, McClendon had a financial relationship with Whittemore, a veteran Wall Street executive who served on Chesapeake’s board from 1993 until 2011. For all eighteen years on Chesapeake’s board and at the time of the loan, Whittemore served on Chesapeake’s compensation committee. In that capacity, he helped determine how – and how much – McClendon would be paid. He also served as a member of the corporate governance and audit committees.

Whittemore, now 81, did not respond to messages left at his office and home.

Ron Hutcheson, McClendon’s personal spokesman, acknowledged the existence of the loan but said the deal between Whittemore and McClendon ended in March 1999. He did not say whether the debt was repaid.

Provided with a copy of the financing documents and asked for comment, former Oklahoma governor and current Chesapeake director Frank Keating said in an email that he would “refer this to our legal team for review and response as appropriate.”

NEW YORK, April 26 (Reuters) – The U.S. Securities and Exchange Commission has opened an informal inquiry into Chesapeake Energy Corp’s controversial program that granted Chief Executive Aubrey McClendon a share in each of the natural gas producer’s wells, a source familiar with the matter said on Thursday.

That inquiry, being led by the SEC’s office in Fort Worth, Texas, comes after Reuters reported about loans McClendon had obtained on those wells that raised concerns about a potential conflict of interest by the company’s CEO.

Chesapeake said it would end the program that gives McClendon a 2.5 percent stake in every one of the company’s thousands of wells in 2015, when the shareholder approval of the program that started in 2005 expires.

The company said in a statement earlier on Thursday that its directors had never reviewed or approved McClendon’s mortgages on stakes in those wells, reversing its prior assertions that its board of directors was “fully aware” of McClendon’s financing transactions around the well ownership stakes.

“The board of directors did not review, approve or have knowledge of the specific transactions engaged in by Mr. McClendon or the terms of those transactions,” the company said.

Ratings agency Standard & Poor’s said on Thursday the turmoil surrounding the well ownership program and McClendon’s personal transactions could hamper the company’s ability to meet “massive external funding requirements stemming from its currently weak operating cash flow.”

S&P lowered its credit rating for Chesapeake – which has been junk grade for some time – one notch to “BB” from “BB-plus” and said another cut could occur within a few months.

April 23 (Reuters) – Chesapeake Energy Corp’s chief executive came under fire last week after Reuters reported that he used his stakes in company wells to take out as much as $1.1 billion in personal loans.

Now, Reuters has found, CEO Aubrey K. McClendon has employed another way to cash in on a perk unique to the company he runs: He sold his share of two large energy plays at the same time the company divested its interest.

Analysts say the deals, which generated $6.5 billion in proceeds, pose a potential conflict because of the possibility that they could have been timed and structured to suit McClendon’s personal interests, rather than those of the company he runs.

“I can imagine a scenario where Aubrey is suffering some financial distress and might want to get a deal done – and it’s not the best price for the company,” said Joseph D. Allman, oil and gas industry analyst at JPMorgan in New York. Because of the potential conflict, Allman said, Chesapeake should scrap the CEO perk that makes them possible.

McClendon’s deals stem from his involvement in an incentive, unique to Chesapeake among large energy companies, called the Founder Well Participation Program. The well plan gives McClendon the right to purchase an interest of up to 2.5 percent in all the wells the company drills in a given year. In exchange, he pays an equal percentage of the costs.

Reuters reported last week that McClendon had used his stakes in thousands of Chesapeake wells as collateral for up to $1.1 billion in personal loans – the majority of which were extended to him by an investment management company, EIG Global Energy Partners, that is also a major investor in Chesapeake itself. The money was used to finance his participation in the well plan, Chesapeake said.

Chesapeake’s shares fell sharply after the report. Some investors called for a management shake-up and full disclosure of McClendon’s loans and other financial interests that may clash with those of the company. They say the loans are troubling because McClendon’s big lender is simultaneously a major investor in Chesapeake, raising the possibility it received favorable terms. The size and terms of the loans also create the risk that McClendon could seek to influence corporate decisions on behalf of his lenders, instead of shareholders, analysts said.

By Brian Grow and Anna Driver

(Reuters) – Chesapeake Energy Corp’s chief executive came under fire last week after Reuters reported that he used his stakes in company wells to take out as much as $1.1 billion in personal loans.

Now, Reuters has found, CEO Aubrey K. McClendon has employed another way to cash in on a perk unique to the company he runs: He sold his share of two large energy plays at the same time the company divested its interest.

Analysts say the deals, which generated $6.5 billion in proceeds, pose a potential conflict because of the possibility that they could have been timed and structured to suit McClendon’s personal interests, rather than those of the company he runs.

“I can imagine a scenario where Aubrey is suffering some financial distress and might want to get a deal done – and it’s not the best price for the company,” said Joseph D. Allman, oil and gas industry analyst at JPMorgan in New York. Because of the potential conflict, Allman said, Chesapeake should scrap the CEO perk that makes them possible.

McClendon’s deals stem from his involvement in an incentive, unique to Chesapeake among large energy companies, called the Founder Well Participation Program. The well plan gives McClendon the right to purchase an interest of up to 2.5 percent in all the wells the company drills in a given year. In exchange, he pays an equal percentage of the costs.

Reuters reported last week that McClendon had used his stakes in thousands of Chesapeake wells as collateral for up to $1.1 billion in personal loans – the majority of which were extended to him by an investment management company, EIG Global Energy Partners, that is also a major investor in Chesapeake itself. The money was used to finance his participation in the well plan, Chesapeake said.

HOUSTON (Reuters) – Chesapeake Energy Corp (CHK.N: Quote, Profile, Research, Stock Buzz), in response to a Reuters report earlier this week, will disclose to shareholders the existence of loans its CEO Aubrey McClendon took out against his interest in thousands of wells granted to him as a corporate perk, according to a regulatory filing on Friday.

Reuters reported on Wednesday that McClendon has borrowed as much as $1.1 billion against his 2.5 percent interest in wells received as part of his compensation.

The loans, taken out over the past three years, were previously undisclosed to shareholders, analysts and academics said, raising concerns that McClendon’s personal financial deals could compromise his fiduciary duty to Chesapeake.

The company did not detail the amounts and terms of the loans, nor specific lenders, according to a preliminary proxy filing with the U.S. Securities and Exchange Commission.

The report drew swift reaction from investors, who pushed the stock down 5 percent the day it was published. The stock has since recovered and closed down 3.1 percent at $17.44 on Friday on the New York Stock Exchange.

Meanwhile, pressure on the company has intensified. Phil Weiss, an oil analyst at Argus Research who has had a “sell” rating on Chesapeake, said in a note to clients on Friday that it was in the best interest for McClendon, the board of directors, or both to step down.

“When we consider the full financial picture at Chesapeake, including its high debt levels, its use of financial engineering, the relatively low quality of its financial data, the questionable nature of some of the CEO’s transactions with the company … we believe the best thing for investors would be to replace the board and/or the CEO,” Weiss wrote in his note to clients.

By Brian Grow and Anna Driver

(Reuters) – The lender behind $500 million worth of Aubrey McClendon’s personal loans is a private equity firm with headquarters across the street from the White House and the Chinese government as a minority owner.

The firm, EIG Global Energy Partners, is run by R. Blair Thomas, an attorney and veteran energy investor. Formerly the Energy & Infrastructure Group of Trust Company of the West, EIG spun out of TCW in January 2011. It had $9.5 billion under management at the end of last year.

Those deep pockets – along with special ties to McClendon – have enabled it to bankroll his share of Chesapeake wells, according to minutes of a February 2011 meeting between EIG and the New Mexico State Investment Council, the state’s public investment fund.

At the meeting, EIG chief operating officer Randall Wade sought a $50 million investment from New Mexico. Asked about a prior EIG investment in McClendon’s well interests, Wade boasted EIG had known Chesapeake for more than 25 years and “provided pre-IPO financing for them in the late 1980s.”

Those tight bonds, Wade said, have created other unique opportunities for EIG.

“In fall 2008, Mr. McClendon didn’t have liquidity to participate in the (well) program in 2009, at which point EIG entered into discussions with him” and ultimately formed a special purpose vehicle called Larchmont Resources, Wade said.

By Anna Driver and Brian Grow

(Reuters) – Aubrey K. McClendon is one of the most successful energy entrepreneurs of recent decades. But he hasn’t always proved popular with shareholders of the company he co-founded, Chesapeake Energy Corp., the second-largest natural gas producer in the United States.

McClendon, 52, helped cause Chesapeake shares to plummet amid the financial crisis when he sold hundreds of millions of dollars in stock to raise cash for himself. Later, to settle a lawsuit by shareholders, he agreed to buy back a $12 million map collection that he’d sold to Chesapeake.

His approach to running his company also is renowned: Among other employee perks, on-site Botox treatments are available at its headquarters in Oklahoma City, Oklahoma.

Now, a series of previously undisclosed loans to McClendon could once again put Chesapeake’s CEO and shareholders at odds.

McClendon has borrowed as much as $1.1 billion in the last three years by pledging his stake in the company’s oil and natural gas wells as collateral, documents reviewed by Reuters show.

The loans were made through three companies controlled by McClendon that list Chesapeake’s headquarters as their address. The money is being used to help finance what could be a lucrative perk of his job – the opportunity to buy into the very same well stakes that he is using as collateral for the borrowings.

HOUSTON (Reuters) – Aubrey McClendon, the CEO of Chesapeake Energy Corp, has borrowed as much as $1.1 billion over the last three years against his stake in thousands of company wells – a move that analysts, academics and attorneys who reviewed loan documents say raises the potential for conflicts of interest.

The loans, which haven’t been previously detailed to shareholders, are used to fund McClendon’s operating costs for an unusual corporate perk that offers him a chance to invest in a 2.5 percent interest in every well the company drills. McClendon in turn is using the 2.5 percent stakes as collateral on those same loans, documents filed in five states show.

The size and nature of the loans raise questions about whether McClendon’s personal financial deals could compromise his fiduciary duty to Chesapeake investors, experts who reviewed the documents told Reuters.

Both McClendon and Chesapeake said the loans don’t pose any conflict of interest. And they are private transactions that the company has no responsibility to disclose or to vet, Chesapeake said. “There are no covenants or obligations in my loan documents or mortgages that bind Chesapeake in any way,” McClendon wrote in an email to Reuters.

The revelation comes as McClendon is scrambling to help Chesapeake weather a multi-billion-dollar cash shortfall amid a plunge in natural gas prices.

McClendon’s biggest personal lender, EIG Global Energy Partners, has also been a big financier for Chesapeake. EIG and other investors have helped Chesapeake raise more than $2 billion through the sale of preferred shares that provide very favorable terms to the buyers. (Editing by Blake Morrison)

(Reporting By Anna Driver and Brian Grow)