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June 6, 2014

Chesapeake charged with fraud, racketeering

Company denies wrongdoing

OKLAHOMA CITY — State prosecutors in Michigan have filed fraud and racketeering charges against Oklahoma City-based oil and natural gas producer Chesapeake Energy Corp.

Prosecutors allege Chesapeake and its agents used a scheme known as "cold drafting" to obtain lease options on landowners' properties. Prosecutors say the practice prevented competitors from leasing the land — then Chesapeake did not compensate the property owners.

Chesapeake spokesman Gordon Pennoyer told reporters that the allegations are baseless and have no merit.

Prosecutors say Chesapeake had its agents lease land in northern Michigan and tell landowners their mortgages would not be an obstacle — but when competition for leases ended the company canceled nearly all its leases, using mortgages as the purported basis.

The company is to be arraigned on the charges June 25.

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