Editor’s Note:

A previous version of this article incorrectly stated that Chesapeake CEO Aubrey McClendon borrowed funds from companies he controlled, rather than from third-party institutions, and mischaracterized the nature of personal work performed for Mr. McClendon. The Fool regrets the errors.

This year I introduced a weekly series called "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top -- and with leaders like these on your side, sometimes you don't need enemies!

This week I want to highlight the CEO of Chesapeake Energy (NYSE: CHK), Aubrey McClendon.

The dunce cap
Great news, folks. If you find yourself in a pinch for money, just give Chesapeake's CEO a call, he might be able to help you out.

"How is this possible?" you might be wondering. It appears that simple loophole logic has allowed Mr. McClendon to borrow $1.1 billion (with a "b") by mortgaging his interest in the company's gas wells as collateral. What's absolutely horrifying about this whole situation is that the loan itself is just the beginning of questionable practices at the company.

To start, these loans were made by three third-party institutions, $500 million of which came from EIG Global Energy Partners who is a large financier for Chesapeake Energy. McClendon is intermingling his personal and business connections, setting himself up for intense scrutiny as well as leaving investors on edge.

Where's the Securities and Exchange Commission throughout all of this? Sitting on their hands, because they can't do a thing about it. You see, Mr. McClendon backed his loans with the wells instead of personal stock, which is beyond the legal jurisprudence of the SEC. We've got enough loopholes here to start a hula-hoop factory.

To the corner, Mr. McClendon
But wait -- there's more!

What compounds this enormously unwise loan and using his stake in Chesapeake's wells as collateral is the fact that Mr. McClendon seems to have the money-managing skills of Alicia Silverstone's character in Clueless.

According to Forbes, in 2008, Mr. McClendon was forced to sell nearly his entire stake in Chesapeake Energy to cover -- get this -- a $552 million margin call! As if selling millions of shares wasn't enough punishment for shareholders, Mr. McClendon got the company's directors to purchase his antique map collection for $12.1 million.

For those of you skimming this article, allow me to repeat this because I think this is one of the most egregious wastes of money I have seen yet. Chesapeake's board authorized the use of $12.1 million in corporate cash to buy a collection of vintage maps from its CEO, who needed the money to cover a margin call. Somehow an open-jawed smiley-face here wouldn't quite do me justice.

But that wasn't even the end of it. The company awarded Mr. McClendon nearly $100 million in incentives, of which $75 million was part of "well cost incentive" -- the same incentive he appears to have collateralized to obtain his $1.1 billion loan. In addition, the company's board lowered the required stake its CEO was to have in Chesapeake's stock in response to Mr. McClendon having to sell his shares to cover his margin call.

Chesapeake Energy is already suffering from the lowest natural gas prices since 2001 and recently cut back dry-gas capital expenditures by $2.2 billion from 2011. Although some of the largest names in the industry have curtailed production, including Canada's EnCana (NYSE: ECA) and Ultra Petroleum (NYSE: UPL), it's Chesapeake, which supplies 8.3% of the United States' natural gas, that's feeling the biggest pinch as natural-gas prices head lower. When you add in this week's PR circus, you have a recipe for disaster.

Mr. McClendon, you're a shame to the rest of us Bastille Day babies!

Do you have a CEO you'd like to nominate for this dubious honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just may wind up seeing your nominee in the spotlight.

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