BP: Business Partner (Chesapeake Energy)

As part of my ongoing look at British Petroleum, I discovered sometime last week a deal BP America struck in 2008 with a company called Chesapeake Energy. This deal/connection is worth examining because the CEO of Chesapeake Energy, a man named Aubrey K. McClendon, is one of the most egregious and blatant, yet under-reported, benefactors of corporate cronyism and corruption within the whole messy fallout of the 2008 economic collapse.

BP America published this press release dated September 2, 2008 which announced a “joint venture whereby BP will acquire a 25% interest in Chesapeake’s Fayetteville Shale assets in Arkansas for $1.9 billion” (emphasis mine). McClendon remarked that Chesapeake were “honored to broaden our business relationship with BP and are excited about the mutually beneficial nature of our transactions with them.” McClendon’s statements in that press release followed quickly on the heels of another deal between Chesapeake Energy and BP, announced in July 2008, which saw the company pay Chesapeake $1.75 billion dollars for 90,000 net acres in the Arkoma Woodford Shale basin. The timing of these deals are interesting for numerous reasons, not least of which is that by the end of 2008 Chesapeake Energy’s stock price “collapsed from $74 a share to $9.84, wiping out $33 billion in shareholder value” according to reporter Mark Ames. McClendon himself lost 94% of his stock on a margin call to the tune of an estimated $2 billion. Now you would think that somebody who lost a company “$33 billion in shareholder” value, essentially overnight, might be disciplined, terminated and/or otherwise relieved of their responsibilities with all possible haste; you’d be wrong. What actually happened in the new “day is night, black is white” world of corporate America is that McClendon was awarded a bonus package worth up to $112 million, including $12 million dollars for his collection of “maps and watercolors, $600,000 for the private use of the corporate jets, nearly $600,000 for accounting services and $131,000 for personal ‘engineering support.'” according to Forbes. The Forbes piece, titled interestingly enough “Would BP Please Buy Chesapeake Energy“, characterized McClendon’s bonus as “madness” which was “unique among big publicly traded energy companies” and ultimately as being “unparalleled in the industry.”

This brazen, insulting multi-million dollar reward by Chesapeake’s board of directors to McClendon for what basically amounts to miserable, spectacular failure was challenged in the courts by groups, with huge amounts of suddenly worthless Chesapeake stock, such as the Louisiana Municipal Police Employee Retirement System. The New York Times quoted Marc I. Gross, a lawyer retained by the Louisiana Municipal workers, thusly:

“Given that Chesapeake’s earnings dropped by half, the $75 million bonus appears not attributable to Mr. McClendon’s exemplary performance but rather to the extraordinary losses he sustained when his Chesapeake shares declined by 60 percent. As such, the bonus appears to be a C.E.O. bailout, while ordinary shareholders got stuck with their losses.”

That’s one of the saddest things I’ve learned while looking into some of the ‘deals’ that were made right before and after the financial meltdown: that so many state police and municipal workers lost their pensions to these shell games and fraudulent derivative deals. It just shows that these poor people (Police Officers and Firemen) were shamelessly and continuously used as political pawns in the years after the terrorist attacks when politicians (mostly Republicans) were tripping over themselves to call them “heroes”, but when the banksters and crony capitalists swooped in to steal their hard-earned money…silence. Not a word in defense of the heroes when they actually needed some liar like Rudolph Guiliani to throw his weight around on their behalf. I guess they’re only heroes when the cameras are around during campaign season. Seriously though, imagine being a cop who toiled honestly in Louisiana, one of the poorest states in America, putting in years of thankless, grueling and dangerous work only to have your retirement savings wiped out in the blink of an eye and then see the man responsible for that loss simultaneously receive a $112 million bonus. The disrespectful weight behind a slap in the face of that magnitude would have knocked down Muhammed Ali.

Predictably (sadly) the shareholders’ lawsuit was dismissed by an Oklahoma County judge for “procedural reasons” in March of this year. One reason that McClendon and the board of directors might have prevailed in the Oklahoma courts is that the ‘K’ that constitutes McClendon’s middle initial stands for: Kerr. As in he’s the grandson of former Oklahoma Senator and Governor Robert Kerr, co-founder of Kerr-McGee Oil. Sound familiar? In addition to the connections bestowed on him thanks to this strategic, beneficial accident of birth, the Chesapeake Energy Board consists of “McClendon’s cousin Breene Kerr; Frank Keating, Republican ex-governor of Oklahoma whose son Chip (and Chip’s wife) works for Chesapeake; Don Nickles, Republican ex-Senator of Oklahoma who co-funded with Aubrey the Republican anti-gay marriage campaign in 2004” according to Mark Ames. As usual the fix was in.

One of the board’s stated reasons for awarding this ludicrous bonus package, according to the Times, was that they were afraid McClendon would “abandon the company” due to “other opportunities that exist in the industry.” Normally you might laugh at the thought of someone so inept actually being depicted as a hot commodity that must frantically be retained lest he prompt a ferocious bidding war, but Lawrence Summers, Robert Rubin, George W. Bush and others have demonstrated that epic, monumental failure at every turn can be rewarded with ever increasing levels of power and responsibility in the new realities of America. Chesapeake’s board also claimed that it’s hands were tied due to McClendon’s employment agreement which “required him to hold Chesapeake stock worth five times his annual salary and bonus.” Nice work if you can get it (you can’t).

Ironically McClendon’s 11th hour deals with BP were cited as a major reasons for his bonus, which brings me back to looking at the relationship between BP America and Chesapeake. The two deals consummated in 2008 saw BP paying Chesapeake $3.6 billion. These deals essentially gave Chesapeake’s board the only legitimate cover to save McClendon while all other stockholders were thrown to the wolves. As was mentioned earlier Aubrey McClendon was a huge financial contributor to a conservative christian group called Americans United to Preserve Marriage that sought to ban gay marriage. McClendon also donated $250,000 to the infamous Swift Boat Veterans for Truth attack ads which damaged John Kerry’s 2004 Presidential campaign. These are the people that BP America do business with. It’s not bad enough they have non-existent safety standards and ruin the earth, they also do billion dollar business deals with incompetent conservative extremists. I don’t think it’s a stretch to say that the money they funneled to Chesapeake could indirectly end up, through Mr. McClendon’s conservative advocacy, funding the next round of treacherous, petty smears and lies that adversely effect an important Presidential campaign. It’s a vicious cycle. The good old boys and gals network on the Chesapeake Energy board bailed out McClendon, not just because he’s one of them, but also because if he went down like the Louisiana Municipal workers there would be one less conservative multi-millionaire willing and able to plunk down a quarter of a million dollars to fund a specious, despicable ad blitz the next time one is needed. Without the ad blitzes they won’t be as able to get Old Boy Network Presidents installed and willing to endorse and enable their various forms of corruption. The Kerry campaign made a lot of mistakes, foremost in my opinion was not responding to the Swift Boat lies quickly and aggressively enough. But what if Kerry had prevailed in 2004? That would’ve have been 4 crucial years the Bush administration wouldn’t have had to dilute, degrade and destroy regulatory agencies like the MMS, which basically let oil companies like BP and Halliburton turn the Gulf of Mexico into the dangerous, unregulated free-for-all it has become. Thanks to the Bush era MMS, the Gulf is “one of the few remaining places on the planet where oil producers are permitted a relatively free hand.” Sadly…you can see what they’ve done with it.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: