Private equity fund Energy & Minerals Group told investors on Wednesday it will stop entering new deals with Aubrey McClendon, the now deceased founder of Chesapeake Energy Corp (CHK.N), a day after the U.S. government charged him with breaking antitrust laws.
Update: Reuters reports McClendon died in a car accident in Oklahoma City on Wednesday.
In a letter to investors seen by Reuters, EMG’s Managing Partner John Raymond said his fund would “cease any and all new business activities” with McClendon, a legend in the U.S. energy industry.
The comments mark another reversal of fortune for McClendon, removing EMG as one of his main sources of capital to find and develop land in Ohio, Pennsylvania and other shale-rich states, as well as overseas.
The U.S. Justice Department charged McClendon on Tuesday with rigging bids for oil and gas acreage. McClendon has denied the charges and was not immediately available for comment on Wednesday.
Houston-based EMG, which has invested some $3 billion in ventures with McClendon since he left Chesapeake in 2013 after investors questioned his leadership, said the allegations will not affect any of its portfolio companies.
But the indictment could signal that prosecutors are ready to apply stricter scrutiny to an industry that has seen few legal challenges in recent years to the way land lease agreements are negotiated with private landowners for thousands of parcels of minerals across the United States.
“These are serious allegations that have been made against McClendon (and could have equally serious implications across the industry) and EMG takes this matter very seriously,” Raymond wrote.
The fund, which manages about $17 billion in assets, is planning to launch several energy companies it co-founded with McClendon’s American Energy Partners by the end of March.
“It is purely a coincidence that these charges have been brought at the same time as these business arrangements were already being finalized,” Raymond wrote in the letter.
Raymond stressed in the letter that the charges against McClendon “have nothing to do with EMG or any EMG portfolio company.”
As of Feb. 26, McClendon is no longer CEO or a board member of any EMG portfolio company, Raymond added.
(Reporting by Ernest Scheyder)