Chesapeake Energy CEO Stole $1B From Shareholders

My father owns shares of Chesapeake Energy.  He likes the high dividend yield.  He also wants to be “diversified”, so he doesn’t go 100% into gold and silver ETFs.

This story was interesting.  The CEO of Chesapeake Energy got a controversial perk.  It’s the Founder Well Participation Program.  The CEO gets the option to buy 2.5% of every well that Chesapeake energy drills.

As you can imagine, that’s a very lucrative perk.  That’s 2.5% of every single well.

Right away, you can see the potential conflict of interest.  If it’s a borderline decision whether or not to drill a specific well, the incentive is for the CEO to drill anyway.  That maximizes the value of the call option, by maximizing the number of wells drilled.

The CEO borrowed against his 2.5% equity stake in the wells.  Due to declining natural gas prices, the CEO got margin called on his loans.  Natural gas is one of the few commodities whose price isn’t skyrocketing due to hyperinflation.  It was revealed that the CEO had $1B of loans outstanding, with his 2.5% well stake as collateral.

Chesapeake Energy has a market capitalization of $12B.  If the CEO’s 2.5% stake is worth $1B, that means that the CEO stole $1B from Chesapeake energy shareholders.  That’s nearly 10% of the value of the corporation.

That’s why the stock market is a bad investment.  Even though Chesapeake Energy has a tangible product and earnings and a dividend yield, the CEO still robs the shareholders with a ridiculous compensation agreement.

A pro-State troll says “That’s the compensation agreement.  It’s fair and square.”  The problem is that a CEO salary negotiation is not a true free market exchange.  The board of directors sets the CEO salary, BUT the CEO usually gets to pick the Board of Directors.  The Board of Directors are spending the shareholders’ money and not their own personal money, so there’s no incentive for them to spend wisely.  That’s the usual Principal-Agent Problem.  If you’re on a corporation’s Board of Directors, that’s a high-pay low-effort low-skill job.  You aren’t going to rock the boat and risk your gravy train, by refusing the CEO’s salary demands.

There’s another potential conflict of interest.  The CEO may have borrowed $1B from the same bank that does business with Chesapeake Energy.  The bank may give the CEO a lucrative rate on his loan, in exchange for Chesapeake Energy’s business.  That wasn’t in the articles I linked.

This also shows the greed of the CEO.  The well call options were worth $1B.  Rather than cashing out over time, the CEO wants his money *NOW*.  The CEO took out a loan for $1B against the call options, cashing out his equity immediately.

Negative real interest rates are also a factor.  If interest rates are 5% and true inflation is 20%-30%, then the CEO does maximize his profit by maximizing his leverage.  With an interest rate of negative 20% on $1B, that’s a gift of $200M per year from the State banking cartel.  The CEO takes the $1B and invests in other businesses.  Those other businesses may also profit via leverage and negative interest rates.  In this manner, the State credit monopoly favors insiders at the expense of individuals.  Insiders get to use greater leverage at lower interest rates.  In this case, the CEO got stuck with a margin call when natural gas prices declined, and the scam was exposed.

The only reason the CEO got caught was that he was too greedy.  If he didn’t borrow $1B and get a margin call, nobody might have ever known.  Getting a $1B perk from a corporation worth $12B crosses the line into ridiculousness.  It’s so bad that even a hardcore Statist would say “Wait a minute.  That’s excessive.”

The Founder Well Participation Program was a ridiculous perk.  The CEO robbed his shareholders.  That’s why the stock market is one big scam.  As a small shareholder, you can’t prevent the CEO from paying himself a ridiculously large salary, diluting your ownership.

11 Responses to Chesapeake Energy CEO Stole $1B From Shareholders

  1. Anonymous Coward May 3, 2012 at 4:25 pm

    > ETFs

    That stands for Exchange Traded Fund. From my limited understanding, an ETF invests in tens of individual companies in a certain area. Then you just buy the ETF and get diversification across say 50 different gold or silver mining companies.

    So is the price of 1 share of the ETF an average of its holdings? Or can the price get higher than its individual holdings? Suppose lots of people buy shares of the ETF very quickly. Will that push the price of the ETF higher than the sum of its individual holdings?

    Who are the kind people that manage these ETFs? What fees do they charge? 1%? 2%? 3%?

    It would be a pity if the ETF went up 5% a year and 3% of that went in fees?

    Suppose the ETF managing company goes bankcrupt?

    • GLD and SLV are the two biggest ETFs for gold and silver.

      They are not risk-free. They can lend the metal to short-sellers, and the short-sellers can default. The bank that runs the ETF can default, and the shareholders get Corzined.

    • I Keith McCloud driver trainer EMP#082004
      Decorated veteran!
      And a stock holder in Chesapeake Energy Corporation and I also work for a Chesapeake owned company Oilfield Trucking Solutions.

      Within 3 weeks time: I was discriminated against and unjustly fired from my job.

      Joe Stumpf (304) 406-2619 was told by nick Schrader (724) 324-2205 the main boss to get rid of me in a driver evaluation. But instead Joe wrote me a good report this made Joe Stumpf loose his position as driver trainer on night shift. This undermined my ability to train because Joe told other people Nick’s intention and why listen to me because I was on my way out the door.

      Joe might not be willing to tell hr about this for fear of it getting back to Nick Schrader and becoming a target himself, but I do believe Joe is a good guy in all this. And if the phone call came from the unemployment office he might just tell the truth about it. Because Joe would not want to see me totally destroyed without any income. But in the end we were all in job preservation mode with OTS. This is because of the treachery of upper management.

      I then was appointed driver trainer position again by Nick upon my request on 8/29/13 because I was the best at what I did per Nick Schrader. Even then Joe warned me about Nick being out to get me fired. I was in disbelief because of the promotion.

      About a month later I was asked if I would train John Martucci by James Sexson I told him yes so john was appointed new driver trainer John Martucci.

      When talking to other drivers about procedure they complain that I am being too picky about little things and John feeds the fire and agrees with them taking me even more notches from our goal of being spill free (Dave Disantis would not listen to me after I told him 3 times not to disconnect the way he was and he had a spill with three days off) john is not a team player. He gives me no backing.

      John Martucci blamed me for a problem with Nate Smith 1 (830) 317-0226 a team leader from Pearsall Texas because he didn’t have time to spend with John. John told me he started to go with him one night and Nate took him back to the yard and left him there and went out by himself this upset john very much. I explained to john it was not my fault but he was still angry with me about that. He used aggressive words like wtf am I a nobody? I had asked Nate if I could go to the frac and observe drivers and Nate said okay but Nate had other plans for him and he became very angry about it.

      I had keys to pickup truck to go to observe drivers John demanded I give them to him. Instead of pressing the issue I gave him the keys and took the van. I found this very strange as well when I asked him about it he said I have the pickup too much. He told me I needed to be in trucks asking me when was the last time I was in a truck. Confusing when Nick told us both to be in pickup trucks watching everyone.

      11/7/13 John told me that he knew about vent lines two nights ago 11/5/13 4:00 am that we didn’t have to use them on containment. When I had an in depth discussion with him about a driver that was not using it. I had to hear first hand from another driver we don’t have to use vent lines when sucking on containment (surprisingly when most condensate vapors come from inside the tank on the truck but what do I know?). He said it was too early to tell me about it 4:00 am he has texted me earlier than that before. Then he forgot about it and he said I sounded like his wife. I left the conversation at that point I felt he might have been trying to get a rise out of me.

      I found that John Martucci being new was extremely confident in challenging me on a daily basis. And someone new in that position would be more willing to learn.

      I originally spoke with John about talking about problems on night shift before moving forward with them to management and before we put a target on their head that we discuss it first. (He went straight to management with chuck Spangler (304) 904-5088 and made a mild issue into Spangler having time off without pay.) I found this troubling.
      It seems that john don’t care what I say.

      John also led me to believe that we were to ride along with Spangler while he drove and that Paul and Luke both made jokes about it saying how they will pray for him and hope he don’t decide to just turn the wheel all at once. He said that was f***** up that they would joke about that!! If any of that is true !!! I was perplexed about the whole matter and refused to believe Paul or Luke would say such a thing. After all that has been said about Spangler. That was when I called nick about him driving. Nick said absolutely not! we were to drive. John said he had a head cold and didn’t mean it to sound like we were riding and Spangler was driving even though I expressed great concern over the situation. (John said he has to go because he stinks and has bad breath) this was well known but very discriminative. This situation all started from a tire going off the road once when john was riding with Spangler this happens quite often on the back roads. John did this to me as well he told Luke while we were doing the behm frac that I was driving reckless. An escort Gary see 740-792-0031 overheard the conversation and at that time. I had just left my position as driver trainer previously. He also told Laverne my replacement driver trainer to put me on pad work I heard this myself and he said I didn’t do anything. He was bitter about me back then. Laverne also used reckless driving on a few people that I know of Steve Rawlings this seems to be common practice when someone don’t like another these are all kids games.

      John would not talk to me about Spangler but led me to believe there was a major problem that he could not discuss with me. If it’s a secret why make it sound so grave? Why not downplay it. So I am not so concerned I am in fact a driver trainer and it concerned me.

      John said he is left out and I was always included. We were doing a jsa meeting and because James Sexson didn’t mention him to be one to call he took it out on me and said I should have spoke up.

      I tell john all info I am told I include him even in the tests I make up. He continues to keep things from me I find he has other plans other than me being a driver trainer.

      John told me he was the one that worked with the other drivers and they respect him and come to him. I have no idea what he is trying to prove. John is smoking in trucks with other drivers makes him more popular among the ranks I follow policy and don’t smoke in the company vehicles the smokers don’t like me cause john would smoke with them.

      John sits there while Fred Battista (412) 225-2117 tells me to get the f*** away from him on the Baxter frac while I was trying to explain procedure to him and john says nothing. But tells me he was scared to drive with him because he might take a swing at him. But he treats him like a buddy. Instead of discussing it with him. I’m not sure I completely understand his angle but it should have never gotten this far. Fred received a promotion to go to Pearsall Texas to train. I was approached by Christian a driver trainer from canton he was dropping off a pickup truck. My last night of employment on Thursday 11/21/13 around 11:30 pm and he told me Fred Battista was not following procedure and I told him I know. And he asked why we were still having spills and I told him I have no backing. And no sop to work with.

      After I just told John Martucci that Scott Dever 724-986-3965 was to be shadowed for a week by another driver. Because John was new without asking me he sent him by himself to the Kestner pad that very night alone. Randy Williams was supposed to go with him but Randy Williams
      304-871-1185 or 304-975-0347 truck was not back at the yard yet. That’s what happened to Laverne Seidle (412) 403-3263 He went in and told Paul I was being argumentative and god knows what else. I tried to talk to Paul about my side and Paul refused to hear it. He said we will get Rich Gunther involved corporate? I tried to put all this on the table in the meeting with Rich Gunther but I was immediately silenced and told I have to change. I expressed how I didn’t want to lose my job in the meeting and how I tried to reach out to my team leaders and once again I was silenced but I was told in the meeting no one was going to lose their job. I was also told by James Sexson in the meeting said to call him if I have issues so we can talk about them together and work them out before taking it that far to Rich Gunther I agreed. But I also stated that I tried to talk to Paul about it before it went to Rich Gunther. That fell on a deaf ear as well. I know this meeting was recorded ask them for the recording. 4:00pm 11/8/13.

      On 11/18/13 we had two trainees that had just come to night shift I asked John if he would mind riding with Elroy Kunselman (304) 266-5988 and I would ride with John Hinman he firmly refused to the point of being argumentative. Tony martin witnessed this 304-997-3621 or 304-644-2880. I later that night asked him why he was being like that. He became enraged to the point I had to leave the room again. I called Luke Sexson like I was instructed to do in the prior meeting. To talk to someone about it. Luke called Paul and Paul told me not to speak to John for the rest of the night and he would tell John to do the same. And that this incident was going directly to the top again. John took that information about me not talking to him and changed out my work assignment through dispatch I called dispatch and confirmed that at 7:44 pm 11/18/13 ( this is a text msg. I sent Paul Mcguinnes (724) 621-2238 Luke Sexson (304) 871-0711 and boss nick Schrader :( 724) 324-2205::(Called Michael Williams with dispatch at 7:44 pm after receiving a text msg that I was not going to be with Kunselman I asked who told him to put randy Williams with him and he said john Martucci did. John never even consulted with me about this either. Daring me to confront him after Paul Mcguinnes said not to talk with him. I’m very frustrated) Paul and Luke took that straight to Rich Gunther as well after Luke told me in the meeting to call someone and talk about it. The meeting is recorded if there is doubt.

      There are a fair share of arguments that happen every day at work. We are in the trucking industry even drivers confronting management on a regular basis. Yelling and cursing back and forth between management and drivers I once again was mild. I had certain job functions to do every day and I was constantly being hindered in my job performance By John Martucci. I never had a spill I had 1 returned paper the entire year and 1/2 I worked there I didn’t put a barrel count on my trip ticket and everyone was confused as to how much to even put on a paper management kept changing how many barrel we could haul. They could not find any fault in me at all. Other than when being provoked by a peer about safety issues. I spoke up. There are however the few choice people that follow everything that Nick tells them that get to keep their jobs after major accidents involving trucks and major spills. To name a few Chris Colman, Fred Batista, Jim martin.

      I was terminated 11/22/13 by phone call at 6:04 pm I was given the excuse that I was not getting along with my peer a new fellow driver trainer. And this has happened before. With the attitudes floating around that building and no direction Luke,Paul, and Nick all cursed drivers this confrontation with my peer was very mild. Most all of the guys get warnings or three days off because of the attitudes they have I didn’t even get three days off to think about it I found this discriminative. No warning not a suspension ever the whole time in employment. Just a termination.

      Laverne Seidle Previous driver trainer 412-403-3263 was constantly battling with her peer Joe Stumpf Previous driver trainer (304) 406-2619 Joe went to dayshift to work and Laverne kept her night shift position. There was no termination that took place at all. Neither one even received a suspension. Once again the disagreement I had with John Martucci was mild. I would have been happy with a demotion or even 3 days off. A termination was something deeper that was not brought to my attention in the termination phone call.

      Joe still works on dayshift.

      Laverne ended up being terminated for allowing a driver to drive a truck that was inexperienced and he had a major accident. I can understand that reasoning a little. My opinion is he couldn’t drive a truck. Why hire him? (Driver Eugene Crowder) she unfortunately took a fall for Paul McGinnis’s lack of intelligence and poor leadership. Paul loved to test drive in automatics because they had nicer passenger seats in them for him to be comfortable. That is not the real world. In the real world 18 speeds govern most of our fleet.

      I have never called hr on a single person throughout my year and 1/2 with OTS but I loved my job and I loved the work I did. I have never had a spill, never argued with management and never had a write up.

      I was also told in my termination phone call that Nick presented that I bring a lot to OTS but in the same breath he fired me. He said that he has told me time and time again about my attitude. Baring the most recent problems which were 2 incidents that were recorded.

      1. Disagreement with John Martucci

      2. Termination.

      Two other were in the past of anything that Nick could even attempt to call problematic.

      1. One of those was a personal and Safety issue that was quickly resolved and did not include any employee with OTS about a year ago. How can one personal and safety issue outside of work be included as an episode?

      2. Was I was confused there for a time who was my boss was. Scott Davis, head of dispatch firing people that I liked and did good work. And at the time no one knew who he was. We had a meeting about it and nick said he has the power to fire me and Scott Davis corrected him in the meeting and said he Himself couldn’t. I walked away from that meeting just as confused as my termination phone call. I asked who Scott Davis was and that turned into an issue about 7 months ago. The entire time I have been employed with OTS. If Nick says there are more please have him supply the documentation with my signature or my voice I would like to see or hear his answer. Excluding any personal issues that were never brought to my attention. There was absolutely no reason for my termination I know there is nothing in my file and that I am spotless in this decision.

      Given all that was said I’m not so sure John Martucci was actually acting on his own or going off of instructions from Nick like Joe Stumpf. Either way there is a discrimination going on at OTS that needs to be addressed. During the 2week stand down it was said that Jessica steel lost her position as safety coach not terminated for arguing and fighting with Paul Mcguinnes I believe she had brought a lot to the table about Paul in a discriminative session against her with rich Gunther as well is this a pattern or a problem? But talk behind closed doors told me they didn’t want her there. (Nick himself told me this) the following week she was in an argument with Paul during the stand down and she was transferred.
      Now there are no women in the field and no black men. The perfect Aryan race. I’m sure it was all recorded, and they started an argument with her as well just like me but they knew I would not disagree with management. just like me but a little different she was transferred and got to keep her employment to save her job she felt she was to defend herself in an argument with Paul Mcguinnes. We had a black man working there that was run off due to poking and prodding his name was Ben Terry I enjoyed my time with him. He had to choose a different job because of the back stabbing going on. He put in his two week notice to give them time to replace him and the let him go as soon as he gave it to them. Ben was nothing but positive his whole time there. And we all know about Laverne and how she took a fall for Paul McGuiness. Hell I was even told by tony martin a driver trainer that OTS wouldn’t hire a woman because Nick told him she was too pretty at one of their recent job fairs even though she could drive a truck and had all the qualifications. Said it would cause problems among the guys. (unreal)

      Everything said is factual and very true I know from talking with people in the know nick is in a weed out process to get people in to help him do his dirty work for him. I refuse to step down to no moral values when it comes to right or wrong. About an employee who does there job and supports their family. I’m not the first and I won’t be the last. They even go as far as to open hatches on trucks that people cant check during pre trips and bleeder valves to make people have spills (Paul McGuiness)and then laughs about it (Baxter frac). I find it pathetic seen this first hand. They also drilled a hole into Ben Terry’s (black man) valve so he would have a spill. Also they beat up Jessica steels pickup truck to blame it on her. They tried to get me to drive a vehicle 4quarts too full of oil so the engine would blow up. Paul McGuiness and matt dreas. I have mats text msg saying it was fine to drive and I have a recording of Paul. I’m sure Paul will have a nice retirement waiting for him at Waste Management. (This is the company struggling to get water rights with Chesapeake energy) this is the company Paul McGuiness is from. After he is finished destroying OTS with Nick these are all deliberate actions that are very costly to the stock holder.

      James Luke Sexson told Nate Smith another team leader from Pearsall Texas to have a fun time with a matrix that came out on Fred Battista telling him to have fun with it and rip him up over it. I find this to be very unprofessional as well. So did Nate.
      Everyone in Management Paul, Luke, Jessica and Nick ended all their sentences with “If you don’t like it there is the door” like kids playing games with families and people depending on college money, food and livelihood. It Seems feeling’s from upper management trickle’s down every time. I brought it to their attention with no response or maybe their response was termination without suspension or warning.

      Paul Mcguinnes also told me that all the drivers were idiots and garbage men have more brains than they do I’m sure this is recorded somewhere as well. It is like a bunch of kids in management.

      Sop= Standard Operating Procedure:

      During the stand down that cost drivers and stock holders 800,000.00 they tried to implement their sop that would not work. They said that they would never change it. I have a copy if needed. I told them it would not work. Nick brought john (don’t know his last name) down from canton to check into our findings. John I guess wrote the sop. After many driver trainers trying to convince him that it was wrong. I had a discussion with him and he said that he received an e-mail from Chesapeake that no pressure was to be put on the valves I told him at that point it was suction that we are talking about. I found after our conversation he decided to go with the trainer’s decision. Still months after the stand down there was still no sop. I stated my concern time and time again to no avail. I finally saw the so called completed version with all the corrections in a conference call with nick and and via e-mail. I’m sure that this is all recorded as well. I made finishing touches on the final draft in a conference call at that time. They forgot steps that I informed them about and it was finished. Then I was fired. What a reward? Ask anyone! All I wanted to do is to make sure the drivers were equipped with all the knowledge they needed to keep their jobs and not to have spills in the field. I never wanted to prove anyone wrong at any time. Nick extracted knowledge from me for personal gain then got rid of me.

      There is no character in management Nick never pays attention on matters that can help the driver even when requested by people who know what they are talking about. He would rather fire someone who is trying to help and is dedicated rather than to think his plan won’t work. Nicks understanding of truck utilization was get a truck loaded from any pad and sit on it until we can get it unloaded somewhere while the clock ticks so the truck was stealing money from Chesapeake and at least his numbers was up look at the records this went on for months before the stand down (unbelievable). Everyone understood this was a problem and eventually it would hurt the drivers which it did. Hours were cut on them and Nick won’t allow much overtime only for certain drivers. And everyone wonders why we have so many incidents with spills and dot accidents and why the stand down took place. There was and is still no direction with a sop for drivers to do procedure the correct way. James Tranovich was fired for having a spill according to the old sop. I was in the office while Luke and Paul laughed while they wrote his bad report using safety as an excuse. And yet I was silenced in the meeting when I brought up a safety issue. It was no secret Paul did not like Tranovich ask anyone. This is why we spent 800,000 dollars on a stand down to walk away with no sop I find this in itself very perplexing. We were working on one and it got declined and still nothing up to the day I got terminated. I mean wasn’t this a problem even going into a stand down in the first place? More than a month has passed and we have had 5 spills because people still have nothing concrete. It’s hard to train without directives. Everyone was still doing their own thing in the field. I begged for something concrete to go by. Even during my interview for team leader with Nick. Maybe this is part of the reason I was terminated. Still they are firing people for being confused and causing spills. Ask Elroy Kunselman about the old sop. He is new but very smart we talked about it in depth and he agrees you will have a spill with it. An 87 step sop is not the answer! All the employees deserve direction and should have had something by now. Chris Bersaurd had multiple complaints from many drivers there about management. And still nothing changes. Where is the Leadership? There are many great drivers at OTS that need to support their families. Management is a bunch of Kids in a candy store. OTS was a great place to work till Nick Came along to put his Fingers In everything He has no Idea About. Everyone in Management needs to be severed and put people in there that know the work and the Field. Or Drivers will Keep Getting fired because of poor management. No one in current management knows oil field operations it’s like the blind leading the blind. Jessica steel knew more than them and they got rid of her too. Absolutely pathetic. One thing management Nick Schrader, Paul McGuiness and James Sexson are good at is that they know how to get rid of people who know more than them.

      Chris Bersaurd I beg you to put someone in to replace Nick Schrader I know he is a friend but He is destroying many Families who depend on an income for survival. Remember in my termination recording he begins saying I bring a lot to the table. And in the same breath he says I’m fired. Is that helpful to the company? Or would give me 3 days off first? You decide you seem very intelligent to me! Unless you are giving him these directives in any case I will give you 3 days to respond. You deserve that because I don’t know you. Then all this go’s viral.

      Thank you!

      Keith McCloud

      My cell number is 1-740-632-7878

      • tl;dr

        This isn’t the first time and won’t be the last time someone was unfairly fired from a job. The best thing to do is to focus on finding a better job.

        I can tell that you’re under a lot of stress. Don’t go all postal/Christopher Dorner. Try to avoid being hospitalized with a “mental illness”, the treatment is horrible.

        Take a couple weeks off (if you can afford it), and start looking for a new job. That’s why you always keep a reserve of savings.

        Yes, they cheated you. Let it go and move on to the next thing.

        It’s pretty disappointing to realize that you have no recourse when you’re cheated, but that’s the way it is.

  2. Anonymous Coward May 3, 2012 at 4:27 pm

    Why not invest in your own pick of 6 – 10 gold and silver mining companies rather than an ETF?

    Just make sure you pick different geographical areas and a good mix of large, medium and small miners.

    I’ve heard it said if you can’t pick a good selection of mining companies with 6 choices, then you aren’t doing it right.

  3. Anonymous Coward May 3, 2012 at 4:28 pm

    The trouble with an ETF is that the badly performing companies in it, may drag down the good ones.

    Sometimes too much diversification is a bad thing. You will only get average returns with lots of diversification.

  4. Some silver mining companies aren’t selling their silver as they are waiting for better prices.

    What do you think of JP Morgue and Blythe Masters?

    • 7 comments on the same post is a bit excessive. Why do you switch from Anonymous Coward to Coward #22? Its the same IP address?

      All banksters are crooks. I don’t know about Blythe Masters. JP Morgan is both the custodian for GLD/SLV *AND* they have humongous short positions. In effect, the GLD and SLV shareholders are financing gambling by JP Morgan. Via the magic of rehypothetication, the shareholders could be Corzined if/when JP Morgan goes bankrupt.

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