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Nov. 1 — The co-founder of Minnesota-based energy company Dakota Plains Holdings manipulated the entity’s stock price and hid his control to pocket over $16 million, the SEC said ( SEC v. Gilbertson, D. Minn., No. 0:16-cv-03779, 10/31/16 ).
The commission is seeking injunctive relief, monetary sanctions and an officer-and-director bar against Ryan Gilbertson.
Dakota Plains’ other co-founder Michael Reger agreed to pay approximately $8 million to settle separate allegations against him. Three others were also named in the action.
According to the commission, Gilbertson orchestrated a scheme to steal millions of dollars from the energy company, which operates an oil-shipping rail facility in North Dakota. In doing so, Gilbertson and Reger allegedly named their fathers as executives so they could secretly control the company and issue millions of shares of stock to themselves and others.
The two also had associates Douglas Hoskins and Thomas Howells arrange extensive stock transactions causing the price to jump from 30 cents to over $11 per share, the SEC said. The inflated stock price required Dakota Plains to make bonus payments totaling $32 million to Gilbertson, Reger and others, the commission said.
Gilbertson and Reger also allowed the company to enter into an agreement to borrow money from them under generous terms that included extra bonus payments for the duo, the SEC said.
Minnesota-based stockbroker Nicholas Shermeta allegedly solicited investors for Dakota Plains and recommended the stock to his clients. He allegedly improperly brokered the sales through his unregistered firm Napa Properties rather than through his employer. Shermeta no longer works for Northland Securities Inc., a company spokesman told Bloomberg BNA.
In settling, Reger agreed to pay $6.5 million in disgorgement, $669,365.85 in interest, and a $750,000 penalty. Shermeta and Napa Properties agreed to pay $75,000 in disgorgement, $11,075.49 in interest, and a $50,000 penalty. Shermeta also agreed to be barred from the securities industry with a right to apply for reinstatement after three years. Reger, Shermeta and Napa Properties settled without admitting or denying the findings.
Gilbertson is represented by William Mauzy of Law Office of William J. Mauzy, Minneapolis. Reger is represented by James Langdon of Dorsey & Whitney LLP, Minneapolis. Howells is represented by Erik Christiansen of Parsons Behle & Latimer, Salt Lake City. Hoskins is represented by Aaron Morrison of Wold Morrison Law, Minneapolis. Shermeta is represented by Timothy Griffin of Stinson Leonard Street LLP, Minneapolis.
(An earlier version of this story incorrectly stated that Ryan Gilbertson had been fined and suspended by the Financial Industry Regulatory Authority.)
To contact the reporter on this story: Antoinette Gartrell in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Phyllis Diamond at email@example.com
To view the SEC complaint, visit: http://www.bloomberglaw.com/public/document/United_States_Securities_and_Exchange_Commission_v_Gilbertson_et_.
To view the Reger order, visit: http://www.bloomberglaw.com/public/document/SEC_Administrative_Proceeding_In_the_Matter_of_Michael_L_Reger_Re.
To view the Shermeta order, visit: http://www.bloomberglaw.com/public/document/SEC_Administrative_Proceeding_In_the_Matter_of_Nicholas_H_Shermet.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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