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The Five Dumbest Things on Wall Street This Week: April 27

5. Chesapeake's New Suit

Chill out dudes! All Chesapeake (CHK - Get Report) CEO Aubrey McClendon did was borrow a billion bucks to buy some natural gas wells without telling anybody. There's no need to make a federal case out of it.

What? Somebody already made a federal case out of it?

Wow! Even for Chesapeake that was quick!

A Chesapeake shareholder filed suit against McClendon, the board of directors and the company itself last Thursday in a U.S. District Court in Oklahoma City. The lawsuit came only a day after Reuters revealed that McClendon took out $1.1 billion in personal loans to purchase a stake in the company's natural gas wells under its Founders Well Participation Program (FWPP), a juicy perk for McLendon that the company scrapped yesterday in the wake of the controversy.

The Deborah G. Mallow IRA SEP Investment Plan is alleging that the company's board members didn't come clean about the loans until it was too late. Shares of the driller, for the record, are down 45% in the past year as natural gas prices have tumbled.

"The company's proxy statements, its annual reports on Form 10-K and other SEC filings are required to detail all related party transactions, including all material details that may affect the FWPP, and all actual and potential conflicts of interest that may arise from McClendon's participation in the FWPP," the lawsuit stated, adding that such loans "can easily cloud the CEO's judgment on key issues."

Of course, that's assuming the CEO has any judgment to cloud. For those with hazy memories, this is not the first time Aubrey has been accused by his investors of blowing smoke.

During the stock market swoon of 2008, McClendon was pressured to sell 33 million of his personal Chesapeake shares to cover margin calls. McLendon's forced selling sent Chesapeake's shares down from $67 a share in July of that year to $16 in October. All in, McLendon personally lost close to $2 billion as a result of his audacious -- not to forget senseless, reckless and downright stupid -- behavior.

Luckily, Aubrey's buddies on the board at the time bailed him out with a $75 million bonus and another $12 million for his antique map collection. All that back-scratching, however, caused Chesapeake shareholders to go apoplectic and challenge Aubrey's all-too-cozy relationship with Chesapeake's board in a court case that was only recently settled.

"We are aware of the litigation and will vigorously defend the allegations," said a Chesapeake spokesman about this latest legal spat.

Tell it to the judge buddy. It won't be the first time. And judging by Aubrey's case history, it surely won't be the last.
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