Encana’s denial of collusion charges leaves many questions unanswered

Encana’s denial of collusion charges leaves many questions unanswered by Claudia Cattaneo, September 5, 2012, Financial Post
Allegations earlier this year that Encana colluded with a U.S. competitor to drive down land prices in the state triggered substantial debate within the industry about whether the company went too far, and what constitute appropriate practices between companies bidding against each other for land. The board of directors of natural gas producer Encana Corp. treaded softly by exonerating some of its top executives from allegations of collusion. Still, their behavior looks bad for leaders of a major Canadian corporation that is “committed to ethical business conduct in all that we do” and who are supposed to lead by example. It suggests to Encana’s 6,000 employees that there is lots of room for interpretation over what is ethical. The allegations were serious enough that market analysts saw them as threatening the jobs of CEO Randy Eresman and Jeff Wojahn, president of Encana USA, making a leaderless Encana even more vulnerable to a takeover. Competitor Nexen Inc. was targeted for a takeover by Chinese state-controlled oil giant CNOOC Ltd. after firing its president and CEO, Marvin Romanow, in January.

It’s not surprising that authorities in the U.S. haven’t rushed to make similar conclusions. The company acknowledged it has received a subpoena from the Antitrust Division of the United States Department of Justice and a civil investigatory demand from the Michigan Attorney General. Encana said it will continue to fully cooperate with the investigations of both agencies.

In its four-paragraph statement, released late Wednesday afternoon, the board says it has concluded its investigation with the help of outside lawyers in both Canada and the U.S., and found that the company did not engage in collusion. “We have taken this matter very seriously and over the past eleven weeks have conducted a very rigorous investigation,” David O’Brien, Chairman of Encana’s Board of Directors, said in the statement. … According to a Reuters investigation in July, some of Encana and Chesapeake’s most senior executives were plotting to sidestep the formal land-bidding process in the Collingwood Shale formation in northern Michigan, potentially violating antitrust laws at the state and federal level. The news service revealed an email loop involving Chesapeake vice-president Doug Jacobson, along with Encana vice-president John Schopp and Mr. Wojahn. The emails implied that Mr. Eresman and Aubrey McClendon, Chesapeake’s CEO, were aware of the discussions.

Encana’s statement doesn’t explain what happened, how the investigation was conducted or who was investigated. It doesn’t provide guidance to prevent such allegations from occurring in the first place. It appears to give a free pass to all those allegedly involved. [Emphasis added]

[Refer also to: EnCana faces California gas price-fixing trial ]

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