Monday, May 14, 2012

Why I No Longer Invest in Chesapeake and Reflections on GOP Convention



Our 12 noon luncheon for Wednesday, May 16th will be held at
Italiano’s restaurant, 4801 North Lincoln in OKC. This week the 2
Republican candidates for House District #26 have been invited for our
interview process. They are Michael Shaw and Justin Wood of Shawnee.
In addition, candidates from 2 other races have been invited, however
I will not reveal their names at this time.

Week before last our members voted to endorse and support Nathan Dahm
in his efforts to win the newly created Senate District 32 seat which
is primarily in Broken Arrow. Also endorsed at the same time was Bob
Dani, running against Marian Cooksey the Republican incumbent who
scored a 63 on the Oklahoma Constitution Newspaper’s Conservative
Index last year. Congratulations to both Mr. Dahm and Mr. Dani.

This past Wednesday, our members voted to support Ed Moore in the
Senate district 17 seat which is primarily Shawnee, but it also
extends to the Eastern parts of Oklahoma County. I personally know all
4 of the candidates and regardless of who wins, we will have a good to
very good Republican senator representing that district.

As a point of interest, I never thought we would be involved in this
race, since it was held by a Democrat. However, under the
“fabulooooooouse” leadership of Wallace Collins, Oklahoma Democrat
party chair, they failed to even put up a “dog catcher” level
candidate. Way to go Wallace and company, I am sure the Republican
party is thrilled with the gift of an additional Senate senate without
even having to do battle at the ballot box in November.

Our members chose not to support Mr. Donald Gallup in his effort to
unseat the liberal incumbent, Todd Thomsen (R-Ada). Representative
Thomsen scored a 49 last year and has a lifetime score of a 61 on the
Oklahoma Constitution Newspaper’s Conservative Index. Though we would
love to see Representative Thomsen replaced with a more conservative
Republican, there were a couple of problems with Mr. Gallup’s answers
on our survey. Perhaps more important, his fund raising was low and
therefore a viability problem for us to invest in his campaign. Please
remember, no matter how good a message happens to be, if a candidate
does not have the finances to get his or her message to the voters,
that candidate is not a viable candidate.


In less you live in a cave, without any source of local information,
you are well aware that Chesapeake Energy, along with its CEO and soon
to be former Chairman of the Board Aubrey McClendon, have been under a
good deal of criticism in recent weeks. I don’t want this to seem like
piling on, because I have considered writing about this for a year or
so now, but the recent events make these thought more relevant at this

First, I am not any kind of a registered investment counselor. While I
spent nearly 20 years doing financial counseling, that was always
about budgeting and debt resolution. I always did that as a volunteer
and as such have never taken any compensation for those efforts. I do
self direct our family investments and worked to help my mom and
grandmother when they were still living.

With that said, I purchased around 2,000 shares of Chesapeake Energy
stock at a time it was selling between $1 and $1.50 a share. At that
time I believed it had a fair amount of risk, but I also believed the
extremely low prices for natural gas were on the verge of a
significant rise, which I believed would result in a needed shot in
the arm for the company. I was correct in that analysis and as such
the stock began a steady climb out of those lows to heights around $60
a share if my memory serves me correctly. I eventually sold it all and
made a very nice profit,  my only regret is that I didn’t sell at the
very top, of course that is a regret almost everyone has who invests
in the market. In the ensuing years I have been in and out of
Chesapeake two or three other times, but 4 or 5 years ago, I decided
no more. I wasn’t even tempted when it got down to around $10 a share
about 3 years ago when Mr. McClendon got caught in a margin call and
had to sell the majority of his stock.

Please let me explain. I have decided not to invest any longer in
Chesapeake out of 3 primary opinions.

First, I believe Mr. McClendon is  grossly over compensated. In my
opinion that is due to too much influence upon the other members of
the Board of Directors which has resulted in poor climate of corporate
governance. It has just been announced that McClendon will soon step
down as the Chairman of the Board, which is good, though one report
has stated he will remain on as a board member which I do not believe
to be good. He will continue on as the CEO of the corporation and I
believe his total compensation package is being reduced, which is also
a good turn of events.

Second, I believe Chesapeake has developed a culture of excessive
debt. A company with strong assets and a large cash flow can wheel,
deal and manipulate for a long time, but there may come a day when
they have to “pay the piper” and things will just no longer work out.
About a year ago they announced a plan to greatly reduce their debt
and that is good. However, their debt actually rose in the first
quarter of this year. I hope what I am about to say will never happen
because it would be devastating to a lot of families, and to Oklahoma.
However, I believe if there is a corporation in Oklahoma that might
someday end up being another Enron, I believe it could be Chesapeake.
If I were an employee at Chesapeake, I would make sure my 401-K would
be highly diversified. If you think that isn’t important, just ask the
former employees of Lucent or Enron how well it worked out for them
to have all, or most all, of their eggs in one basket (the now
bankrupt company they once worked for).

Third, I believe Chesapeake is particularly egregious at what I will
label as “corporate theft.” Stay with me as I explain. Just as I
believe anytime people use the government to take money from one group
of citizens to give to other citizens for social wants or needs, I
believe those redistribution schemes are a form of theft.

If I as an individual were to use FORCE to take money from one person
to give to another for either a need or a desire, anyone would easily
recognize that as theft. However, when people use the FORCE of law to
take one person’s money to give to another, we come up with many high
sounding platitudes for a justification of such actions. We call it
feeding the children, paying the bills for the elderly, arts for all,
disaster relief, economic development and on and on. However, morally,
it is still a violation of the 8th commandment and thus theft. In the
same way, I believe that SOME publicly traded corporations can also
practice redistribution theft.

Ask yourself this, who do McDonald's, Walmart, Target, Burger King,
Conoco, Shell and many other corporate retailers sell their products
to? By and large it is the public and as such each of these publicly
traded corporations will set aside a certain amount of corporate
dollars for advertising. That advertising might take the form of TV,
radio, direct mail or newspaper ads. It might also take the form of
signage support at sporting events, support for the arts, and high
profile recognition efforts regarding support for various non-profits.
However, don’t be fooled, in later the later cases the underlying
motive it to build a positive image in the minds of the public of the
company and product and thus to sell more of their products or
services and grow their business.

Now let’s take publicly traded corporations such as Chesapeake, Devon,
Sand Ridge, Continental and etc., do they “directly” sell their
products to the public? I would say for the most part NO. I would
suggest they sell their products to futures traders and refiners, in
other words, middle men who eventually sell those products to
retailers. So ask yourself, does advertising improve the profits of
these kinds of corporations when they are primarily dealing with
professional buyers and not the public which often need coaxing to buy
a product? I would suggest no way.

My understanding is that all the funds produced by a publicly traded
corporation belong to the corporation for its expenses, improvement
and expansion or as dividends to the stockholders. However, when a
corporation that does not directly sell to the public begins to give
away corporate earnings, not matter how worthy the need or desire, I
believe that corporation has moved into the realm of corporate theft.
I believe the way it should work is for the corporation to pass out
excess revenues in the form of dividends to the stockholders and they
in turn can then contribute to non-profits from those dividends if
they so decide.

Of course it is much easier for one or perhaps a handful of corporate
bosses to make a decision to support a favorite cause out of the
corporate checkbook than for the favorite causes to have to appeal to
the many stockholders for support. However, corporate bosses
frequently make those decisions to support causes and for the most
part the stockholders let them get away with such. Much like the
average citizen allows their elected officials to spend money like a
drunken sailor and run up the national debt, now in excess of $16
trillion dollars.

I could care less with how Mr. McClendon spends his own personal
money, but how he and the board spend the corporation’s money was a
concern to me. If I were a stockholder in one of the publicly traded
retailers I mentioned above, or others like them, I would be concerned
that the amount spent on advertising was not excessive and that it was
effective. There are privately held corporations who can spend their
revenues anyway they want with the permission of their limited
stockholders. Also, corporations such as Hobby Lobby, Kimray and
others are family owned and they can of course spend their money
anyway they want.

This past Friday a group of people representing many local non-profits
gathered for a press conference to support Aubrey and Chesapeake. They
expressed how much good has been done for people and the community as
a result of their generosity. It is true, OKC and many folks are
better off as a result of what I have labeled as corporate theft.

But I would say those folks are the “end justifies the means crowd.”
Many of them are the recipients of the corporate largess so it is easy
to understand their support. Certainly OKC is far more upbeat and
glitzy as a result of the millions spent by Chesapeake and other
similar companies. With Chesapeake, I would suggest the cost has been
high, the Oklahoman just reported they had given away over 30 million
this past year in the various states in which they do business. The
new Chesapeake Energy sign on the old Ford Center is beautiful, but
remember Ford sells their products to the public and again, for the
most part Chesapeake sells its products to commodity traders or
refiners. Does anyone really believe the 30 or so million dollars
spent by Chesapeake over the next several years to put their name on
the downtown sports arena building will improve their

I would suggest the vast majority of stockholders, especially those
who live outside of Oklahoma, could care less about all the good that
has been done by their corporation. What they should care about is a
reasonable return on their investment and a sound company.

Many times these “non retail” corporations are pressured into
contributions by the suggestion that they should be “good corporate
citizens” or that they should “give back to the community.” Assuming
these corporations didn’t receive grants and subsidies, I would
suggest those ideas are little more than balderdash. If a corporation
rises up based on their own ingenuity and their ability to raise
private sector capital, then the jobs directly created as well as the
ancillary jobs created by their presence are good for a community. If
corporations create pollution or other problems, their willingness to
work with city leaders to find solutions is being a good corporate
citizen, but having to continually fork over corporate earnings to
gain the title of being a good corporate citizen is baloney.
Supporting non-profits such as United Way is fine as long as the
contributions are voluntary and from the employees (that would be from
the CEO on down to the janitor)  but not from the revenues of the

I absolutely wish no harm to Aubrey or Chesapeake and especially to
the thousands of people they employ. I actually hope for outstanding
success for them. I have many friends and family members who now work
for them. But in light of the 3 reasons I have given, I chose to no
longer own even a small part of Chesapeake Energy.


Fairly well into the convention I walked by Michael McNutt, reporter
for the Oklahoman, and jokingly offered a quote, “just another dull
boring convention”. Actually that was not the case. While I spent most
of the time working our table, those times I was in the convention
hall for voting purposes, it was not dull or boring.

While our founders gave us a Republic (government according to the
rule of law) we use the democratic process to service many parts of
our Republic as well as the operations of the political parties, which
are simply organizations of free will associations. Point is, the
democratic process gets, noisy, messy and difficult at times.

Such was the case last Saturday, but believe me, that is a far better
alternative than moving from the process of civilized warfare (the
political process) to one of revolution, assassinations or armed

There were basically 3 groups at the convention. First group is the
establishment, led by longtime party members and activists who are
tied to powerful special interest groups as as being made up by many
folks from all over the state who attend conventions and see their
friends of many years on these occasions.

They are for the most part, loyalists to the party brand name,
“Republican”. They quite often have never developed a conservative
ideology, but are driven more by a distaste toward Democrats and a
loyalty to their friends with an “R” beside their name. They are quite
often unaware of how their elected officials govern and are thus
offended when their friends (in some cases idols) are called on the
carpet by conservative ideologues for being RINOs (Republicans In Name

The next group I would suggest are the Ron Paul supporters. Many of
these folks have awakened to the risks to our country, especially
regarding the financial solvency of our nation. They have little
patience for middle of the road “goober” type Republicans. They are
also shocked at the liberties that have been taken from the American
people, partly through the destruction of American Federalism and also
by the growth of the federal government into what has and is becoming
a dangerous tyrant.

Many of the Paulies are also non-interventionists, believing that
American troops should not be stationed in nations all over the world.
At least one reason for that concern is that America can’t afford such
as well as the belief that such activities generate ill will for
America and they question if they are really being used to protect us
here at home.

As I said the Ron Paul supporters have little patience with the
establishment and as such want to make major changes in the party,
federal government and also in the state legislature. They are
aggressive in their efforts to make change and as such the
establishment sees them as a threat to their long held power.

What I have just described is the brew for a raucous and passionate
convention. So much so that an extra curricular altercation broke out
in the Oklahoma county delegation area at one time during the

The third group would be the non-Ron Paul newcomers who want to become
involved, but are trying to figure out what is going on and how to
best make a difference. The many delays caused by the procedural
efforts by the Paul supporters were confusing to these newcomers, the
Paulies were aggressive and  to many of the new folks the efforts made
the convention look as though it was breaking down, though I believe
the rules were on the Paulies side in many cases. Add to that problems
with the credentialing. As an example, I got credentialed on Friday
afternoon. However, when the numbers were being confirmed, the members
of my county had not seen me as yet because I was working the OCPAC
table. When it was time to vote I suddenly appeared, but had no
ballot. We had 2 others from our county working as a volunteer and
didn’t have ballots. Correcting that was difficult and it made the
organizers look incompetent. In all reality, conducting a large
convention is difficult and we don’t do this everyday.

I don’t want to imply that the maneuvers by the Ron Paul folks were
out of order, but with time, they began to lose much chance to win the
newcomers over to their side and as such they were on the losing end
of most votes.

While the vast majority of Ron Paul supporters are quality folks and
upstanding individuals, some of them are over the top in their
behavior and some of them have an appearance more like the most rabid
“UI’s” (useful idiots) that make up the occupy movement. I get it that
some of these folks want the kind of liberties so that they can do
virtually anything their little fleshly carnal natures can conjure up.
However, the reality is, they will either win others over to their
issues or they will turn people off. The smart and mature Ron Paul
supporters persuade people and help their cause, the immature and
foolish repulse people and hurt their cause.

Now on to the race for National Committeeman. Not sure, but I believe
Richard Engle actually received a larger number of delegate votes, but
after the “delegate weighting” was computed, Steve Fair won with over
51% of the vote to less than 49% for Richard.

Both of these men are conservatives, both of them are competent to
serve as Oklahoma’s National Committeeman at the RNC. I like them both
and congratulate Steve Fair on his close victory.

Now for what made me mad about the race. Someone briefly showed me an
unsigned “hit piece” intended to destroy Richard’s chances of winning.
First, let me say that 25 years ago I wanted to write a hard hitting
editorial and send it to a paper unsigned or signed with a pen name
other than my real name. I decided at that time that anything not
signed or miss signed, would not be worth reading and should not have

Since then, my name has been attached to a lot of controversial
statements, but I am always willing to stand by what I say, and if
proven wrong or inaccurate, which does occur on occasion, I will admit
my mistake and correct it. I believe Steve Fair had nothing to do with
the hit piece, but whoever was behind it is a coward!

I had time to read only 2 of the accusations and realized they were
the usual representations of half truths or inaccurate portrayals of

The first thing I noticed was the allegation that while a councilman
in Bethany, “they” couldn’t wait to get rid of him. That statement was
probably true, but was it a good thing to get rid of Richard? He chose
not to run for reelection as a councilman, but was considering a run
for Mayor at a future date. I can assure you, the establishment in
Bethany didn’t like Richard because he was a watchdog and advocate for
limited government and the taxpayers.

The liberal mayor at that time wanted the city to pay for the health
care premiums for himself and all the members of the council. To
succeed at that effort, it would take unanimous consent from the
council and Richard, believing it was not proper to burden the
taxpayers for those costs, would not consent. That really made the
Mayor mad.

The other thing that made the establishment mad at Richard was his
successful opposition to a property tax increase. The city needed a
new police headquarters, animal shelter and roof on city hall. If my
memory serves me correctly, it was around a 3 million dollar project.
The city had around 8 million “in the bank” of which the central
planners in the city wanted to save to use for “economic development”
so they wanted to pay for the project with new tax dollars.

Richard formed an organization called “Citizens for a Better Bethany”,
went door to door with informational materials and defeated the
measure. So was wanting to get rid of Richard a good thing or a bad
thing? It was a good thing to the corrupt central planners, but bad
for the taxpayers. The naive taxpayers defeated every reform minded
candidate up for election and it simply was not worth Richard running
for Mayor the next year. How have things gone for Bethany since then?
Well, today the taxpayers pay for the health care and untold hundreds
of thousands of dollars have wasted away on failed economic
development efforts. In a system of self government, we really get
what we deserve most of the time.

The other allegation I read had something to do with Richard’s
associations with members of the John Birch Society as if that was
somehow a bad thing. What is interesting is that Richard had never
been a member of the John Birch Society, but Steve Fair has.

One of the most respected political activists in Stevens County was a
man by the name of Doc Beasley. Prior to his passing away, he used to
drive around with the humorous bumper sticker that said “I’m a member
of the secret John Birch Society.” Of course the Society is not a
secret organization and never has been. The good doctor Beasley was
and still is so respected in Stevens county, that to this day, the
highest award given out at their annual county convention, or perhaps
county fundraiser, is the annual Doc Beasley award for activism, or
what ever it is called.

Doc Beasley was one of the most effective and active Birchers to ever
live in Oklahoma. He recruited Steve Fair into the Society and
mentored Steve along to his solid conservative values. Steve should be
respected for his involvement and Richard should be respected for his
associations with the Birch Society. The cowards who put the hit piece
together are guilty of playing to the ignorance of people who have a
bad impression of the Birch Society, but don’t have a clue as to their
negative feelings about the Society which were ginned up decades ago
by a dishonest smear job.

Enough said about this, it will be interesting to see what happens
during next year’s convention. Will the Ron Paul folks fade away into
history or will they grow in numbers and commitment? Only time will
tell. As much as I struggle with some of what Ron Paul says, there are
parts of his message that must be heard if this nation is to


*  TUESDAY  EVENING MAY 15th  -  OKC AREA  -  The monthly chapter
meeting for the OKC area OK2A (Oklahoma 2nd Amendment) chapter will be
a bit different this month. They will meet at 6:30 the parking
lot of the CVS pharmacy on the Northeast corner of NW 39th street and
MacArthur. They will proceed from there to knock doors for State
Representative Sally Kern. Also, regarding Representative Kern, she
will be having a fundraiser event this coming Friday evening, May 18th
at H&H range. They will have live Branson Style music featuring
“Froglegs from Looneyville, USA. This presentation is being billed as
funny, patriotic and inspirational. H&H is located on the North side
of I-40, about 2 blocks East of Meridian, in OKC. The event begins at
7:00 p.m.

*  THURSDAY EVENING MAY 17 -  TULSA  AREA  -  The Tulsa area chapter
of OK2A will host their monthly meeting, 6:30 p.m. at the 2A Shooting
Center (4616 E Admiral Pl) in Tulsa.

*  OCPAC MEMBERSHIP UP-DATE  -  Last week I mentioned we needed 7 more
folks to step up and join to take full advantage of our $1,000
matching challenge. Six of you responded, so we will only have to send
$50 back to our helpful donor. A huge thanks from me to the 19 who
joined over the past 2 and a half weeks. We are spotting some
candidates who have developed a really strong conservative ideology
and thus will make excellent conservative lawmakers. The more dues
paying members we have, the more help we can give them. If you have
not joined as yet or if you want to contribute additional funds,
please do so now. Instructions on how to join or contribute are after
my sign off.

I look forward to seeing everyone this Wednesday.

Charlie Meadows

No comments: