Personal Loan Defense Leads to Demotion for Lawyer

man on the street
The lead counsel who defended Chesapeake Energy Corp’s Chairman and CEO Aubrey McClendon’s personal loans abuse has been demoted.

McClendon secured $800 million in personal loans by using corporate owned stakes in natural gas wells as collateral.

General Counsel Henry J. Hood defended McClendon in an April press release. Subsequently, McClendon was replaced in June along with half of the company’s directors.

Hood was replaced in mid September as head of the corporation’s legal departments by James R. Webb.

Webb, who is a partner at McAfee & Taft, has been Chesapeake Energy Corp’s chief legal counsel for four months. Hood will be tasked with overseeing the corporation’s land and regulatory departments following the changing of positions.

“This does seem like a demotion for Henry Hood. Based on what we see here, he’s seen his responsibilities scaled back,” said Philip Weiss, an analyst with Argus Research who was interviewed in a Bloomberg interview.

On April 18, Hood announced that the board of directors at Chesapeake Energy was “fully aware” of the existence of the personal loans that McClendon had borrowed using corporate natural gas wells as collateral.

Again, on April 26, Chesapeake Energy released a backpedaling statement claiming that while the board of directors was “generally aware” of McClendon’s personal loans it had not evaluated the financing arrangements. The board of directors began an internal review of McClendon’s personal financial transactions that same day, according to Bloomberg.

Subsequently, half of the board, as well as McClendon, saw their removal by June in what may have been a long overdue “house cleaning” process. Hood, not immune to the “house cleaning,” has now seen his duties reduced. It remains to be seen if Hood will be replaced entirely for his past errors in both failing to defend McClendon and for allowing a dubious personal loan deal to proceed.