Boston, MA 10/21/2013 (wallstreetpr) – Chesapeake Energy Corporation (NYSE:CHK) is being sued by the city of Fort Worth, TX over underpayment of royalties from leases which the company holds for natural gas production. The city alleges that Chesapeake Energy has not upheld its end of the lease agreement and they have also accused the energy company of trying to withhold funds due to the city by entering into fake contracts with affiliate companies.
An investigation was conducted into company’s business records by a group of lawyers and accountants hired by the Fort Worth city council and this was a result of similar cases against Chesapeake Energy filed by the City of Arlington and the Dallas Fort Worth International airport. According to Fort Worth mayor, Betsy Price, the probe uncovered many cases of impropriety and the lawsuit was taken out in an attempt to recoup some of the unpaid funds.
Contrary to the terms of the lease agreements which were signed between both parties, the City of Fort Worth is accusing Chesapeake Energy of taking money out of royalty payments for expenses such as the cost of trucking, marketing and production. The lawsuit also claims that was Chesapeake Energy sold gas to its sister company and deducted the cost of the transaction from royalties as well on the premise that the gas was sold to a third party. The mayor says the decision to take the matter to court came only as a last resort after discussions with attorneys representing Chesapeake energy failed to yield the desired result.
Chesapeake Energy was at one time a very prominent part of the city of Fort Worth and they gave sponsorship to local events and even endorsed the mayor’s campaign for election. However, the unpaid royalties are allegedly in the millions of dollars and the city is making sure that the interest of the city and its residents remains the number one priority.
