The Securities and Exchange Commission has charged five men, four of whom reside in metro Milwaukee, with securities fraud after they allegedly used nonpublic information to buy shares of Leawood, Kansas-based
Tallgrass Energy prior to an announcement that boosted the company’s stock price.
Roy Cook, a Tallgrass independent director and Hartland resident, allegedly obtained information in 2019 concerning a pending offer from New York City-based
Blackstone Infrastructure Partners to purchase all of Tallgrass Energy’s outstanding, publicly traded shares, thus taking the company private.
Cook was named to the Tallgrass board in 2013. Prior to 2001, he owned and managed several businesses in the service industry, including Milwaukee Bulk Terminals, Inc. and Dakota Bulk Terminals, Inc., each of which were sold to Kinder Morgan in 2001. He later served as general manager of Kinder Morgan's local bulk storage terminal at Port Milwaukee, according to a 2009 Milwaukee Journal Sentinel report.
On Aug. 27, 2019, Blackstone made its official offer to purchase all outstanding public shares of Tallgrass Energy’s stock. The announcement caused Tallgrass shares to increase 36%, according to a press release from the SEC.
Between July 20, 2019, and Aug. 27, 2019, Cook is accused of sharing nonpublic information about the offer with his friends.
"Cook knowingly or recklessly breached a duty he owed to Tallgrass and its shareholders through a purchase of Tallgrass securities made in a securities account for a family trust, and by tipping his friends," according to the complaint.
Those friends include
Jeffrey Natrop, a Wauwatosa resident and principal and co-founder at Milwaukee-based Renner Architects;
Peter Renner, a Cedarburg resident and principal and co-founder at Renner Architects;
James Rudolph, a Palm Beach Gardens, Florida resident and friend of Cook’s; and
Peter Williams, a Pewaukee resident and Cook’s former personal accountant.
Renner Architects has developed several buildings in Milwaukee including the 20-story Breakwater Condominiums tower on the East Side, the Harbor Front and Hansen's Landing condominium buildings in the Historic Third Ward and The Waterfront Condominiums building just south of the Third Ward.
In the summer of 2019, Cook was “engaged in a business venture” with both Renner and Natrop that involved the construction of a condo development in Oconomowoc. Cook allegedly told the men over the phone about Blackstone’s offer. Renner then allegedly purchased the right to 20,000 Tallgrass shares while Natrop purchased the right to 48,200 Tallgrass shares. Renner made a profit of $13,520 and Natrop profited $43,862, according to the complaint.
Cook allegedly told Rudolph about the pending Blackstone offer during a week-long sailing trip to the Bahamas. Rudolph then bought 15,000 shares of Tallgrass common stock, resulting in profit of $31,035.
Williams was tipped off by Cook sometime between Aug. 14 and Aug. 18. His stock purchases resulted in “illicit profits” of $463,000, according to the complaint.
The SEC also charged Cook for failing to file required disclosure reports concerning securities transactions by family trusts. Williams allegedly purchased Tallgrass stock in a Cook family trust account over which he had trading authority.
Court documents show Renner, without agreeing or denying the allegations in the SEC’s complaint, has agreed to pay $13,520 in disgorgement, along with $2,623 in interest. Disgorgement is the act of repaying any profits realized from illegal or wrongful conduct. Renner will also pay a $13,520 civil penalty.
Rudolph will pay disgorgement in the amount of $31,035, plus $6,021 in interest. His civil penalty is $31,035. Williams has agreed to pay $524,525 in disgorgement, $100,548 in interest and a $524,525 civil penalty. Court records show Nantrop will pay disgorgement in the amount of $43,862, $8,509 in interest and a $43,862 civil penalty. Finally, Cook has agreed to pay disgorgement in the amount of $88,800, $15,479 in interest and a $801,742 penalty.
"On the basis of the material nonpublic information they received from Cook, the (men) purchased Tallgrass shares and/or call options in advance of the announcements, resulting in illicit profits totaling approximately $613,000," according to the complaint.
Attorneys representing Cook and Renner declined to comment on the case Tuesday. Attorneys representing the other three men did not immediately respond to requests for comment Tuesday afternoon.
