The Securities and Exchange Commission is reviewing a compensation program at Chesapeake Energy Corp. that created potential conflicts of interest for its CEO.
Chesapeake, the nation's second-largest natural gas producer, disclosed the SEC review late Thursday. It said regulators have started an "informal inquiry" and asked that the company and CEO Aubrey McClendon retain "certain documents."
The Oklahoma City company said it will cooperate with the inquiry.
The SEC will review a 19-year-old program that allows McClendon to take personal stakes in the company's oil and natural gas wells. Investors have criticized the program for years, saying it could interfere with the way McClendon runs the company.
Those criticisms came to a head last month when news reports revealed that McClendon took out more than $1 billion in loans to cover his investment in the company's wells. Some of those loans came from a group that was planning to buy Chesapeake assets.
Chesapeake has opened its own investigation into the program. It also stripped McClendon of his board chairmanship, and it will end the well-investment program in 2014.
The Internal Revenue Service also is looking at the well-investment program.
Besides Chesapeake's unique compensation program, McClendon may have other potential conflicts of interest. Reuters reported this week that for at least four years McClendon ran a private hedge fund that traded in contracts for oil and natural gas -- commodities that Chesapeake produces. McClendon apologized to investors this week for "distractions" in his financial dealings. He also questioned the veracity of some of the news reports.
Chesapeake shares have dropped by 27 percent since the beginning of the year, in part because of fallout from McClendon's investments, and also from a plunge in natural gas prices. On Thursday the stock rose 45 cents to close at $17.19, as natural gas prices climbed almost 4 percent.