March 19, 2024

SEC settles with former Tallgrass board member and four of his friends to resolve insider trading charges

On March 12, 2024, the U.S. Securities and Exchange Commission announced the settlement of insider trading charges with several defendants, in connection with the purchase of securities based upon material nonpublic information (“MNPI”) received from Roy Cook, a former board member of Tallgrass Energy LP.  The SEC charged Cook and four of his friends in the U.S. District Court for the Eastern District of Wisconsin for purchasing Tallgrass securities in advance of two public announcements made in 2019 regarding the impending acquisition of Tallgrass by Blackstone Infrastructure Partners. The settlement requires to defendants to pay more than $2.2 million in disgorgement, prejudgment interest, and civil penalties to resolve the charges.

According to the SEC’s complaint, as an independent director of Tallgrass, Cook learned of Blackstone’s offer to acquire all of Tallgrass’ remaining public shares, and its plan to take the company private, after acquiring 44 percent of Tallgrass’ public shares earlier in the year.  Cook allegedly breached a duty owed to Tallgrass and its shareholders by sharing MNPI regarding the impending merger with his friends Jeffrey Natrop, Peter Renner, James Rudolph and Peter Williams.  As alleged in the complaint, prior to the public announcement of the acquisition on August 27, 2019, the four friends  purchased Tallgrass securities based upon the tip.  Tallgrass stock prices increased by 36 percent following the announcement, generating thousands of dollars in illicit profits for the friends, including more than $43,000 for Natrop;  more than $13,000 for Renner; over $31,000 for Rudolph; and approximately $463,000 for Williams.

The SEC further alleged that Cook continued to share MNPI about the acquisition with Williams, who was also Cook’s personal accountant, after the August 27 announcement.  Based on this information, Williams allegedly purchased Tallgrass stock using a Cook family trust account that enabled Cook to earn over $88,000 in unlawful profits.  In December 2019, Williams also allegedly purchased Tallgrass securities for himself enabling him to realize an additional $60,000 in illicit profits.

The complaint charges all five defendants with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks to enjoin them from committing further securities violations.  In addition, Cook was charged with violating Exchange Act Section 16(a) and Rule 16a-13 thereunder for failing to file required reports as an officer or director of an issuer of registered securities.  Without admitting or denying the allegations in the complaint, all of the defendants agreed to pay civil penalties, disgorge illicit profits, and pay prejudgment interest.  Cook agreed to pay a civil penalty of more than $800,000 and over $100,000 in disgorgement and prejudgment interest.  Cook also agreed to an officer-and-director bar.

SEC Press Release | Complaint | Cook Final Judgment | Natrop Final Judgment | Renner Final Judgment | Rudolph Final Judgment | Williams Final Judgment