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Lawsuit Accuses Chesapeake of Mismanaging Retirement Investments

lawsuit

Three former employees of Chesapeake Energy have filed a federal lawsuit accusing the Oklahoma City energy company of violating a federal retirement act and causing the loss of tens of millions of dollars in its retirement program.

The suit (CIV-17-279-R) was filed by David A. Scholl, Brian K. Glover and Dennis W. Vaughn who at the time of the alleged actions worked for Chesapeake Energy. They maintain Chesapeake failed to protect the interests of the Plan’s participants and beneficiaries under obligations of federal law.

The suit alleges Chesapeake’s executives permitted the Plan to continue to offer Chesapeake Stock as an investment option even after they knew or should have known that Chesapeake Stock was artificially inflated, was in “extremely poor financial condition” and the company faced equally poor long term prospects.

The lawsuit also says the thrust of the allegations is that the company along with Jay Hawkins, who was Chesapeake’s Vice President of Human Resources and administrator of the plan and 20 John Does knew “that investment was imprudent as a retirement vehicle.” It also alleges Chesapeake lacked effective internal financial controls and its public statements were “materially false and misleading.”

The legal action contends that as of December 2013, the Plan held more than $387 million in Chesapeake common stock or 46% of total investments. A year later, the plan held $217 million in Chesapeake Stock. At the end of 2015, the Plan held about $50 million in Chesapeake Stock.

“Had the Plan’s fiduciaries invested the Plan’s holdings of Chesapeake Stock in the Plan in a prudent investment option, the Plan and its Participants would have realized a gain of tens of millions of dollars. Even investing in a money market fund would have resulted in no loss of money to the Plan,” stated the lawsuit.