| Posted Wednesday, May 23, 2012, at 5:11 PM ET
Chesapeake Energy, the embattled U.S. natural gas producer, seems to have missed some of the lessons of Enron’s demise. There have been no allegations of fraud. But the U.S. gas firm’s vast trading operation, fondness for complicated holdings and relationships, and corporate generosity are among the traits that, in hindsight, should have invited greater scrutiny of Enron’s edifice.
Chesapeake is a force in the U.S. gas market. It owns real assets, and it is the second-largest producer in the United States, accounting for about 9 percent of gross domestic gas supply according to a recent company presentation. It is the most active driller of new U.S. wells, and has substantial proven and unproven reserves. Meanwhile, joint-venture partners including Total of France and Norway’s Statoil attest to the substance of the projects they are involved in.
By contrast, while Enron’s byzantine structure and other questionable features may have developed to support aggressive expansion, they ultimately helped conceal essentially fake trading activities and fraudulent accounting. There is no suggestion that is the case, or might ever be the case, at Chesapeake. And other companies are complex or, for instance, offer generous perks without running into trouble. Yet it’s notable that Chesapeake, a self-described “bold” competitor in a sector close to Enron’s, has seemingly failed to avoid some of the defunct energy giant’s well documented flaws.
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