The chief executive of a Minnesota-based oil company was a major participant in an investment deal that is under federal investigation for suspected stock manipulation, according to documents reviewed by the Star Tribune.

Federal authorities disclosed the investigation in December, but didn't mention Michael Reger, the co-founder and CEO of Northern Oil & Gas, which is based in Wayzata.

The government went to court seeking information mainly about Reger's former business associate Ryan Gilbertson, who once served as president of Northern Oil.

Investment documents reviewed by the newspaper show that Reger was the second-largest participant in a $9 million loan package that is the subject of the U.S. Securities and Exchange Commission investigation.

The loan package helped launch what would become Dakota Plains Holdings Inc., an oil and sand transportation company based in Wayzata with operations in North Dakota.

It's not part of Northern Oil & Gas, a publicly traded business that invests in the Bakken oil fields. However, Reger, Gilbertson and a third former Northern Oil executive helped start Dakota Plains, whose stock began trading publicly in March 2012.

Federal investigators are looking at that public offering and at the loans, called promissory notes, to Dakota Plains, the SEC said in court filings in December. The notes had an escalator clause that paid note holders a bonus based on Dakota Plains' stock price in the first 20 days of trading. They stood to collect a windfall if the stock price jumped.

And it did. Shares quickly hit $12, stayed at or near that price for almost exactly 20 days and declined, never returning anywhere near that level. For the $9 million in loans, the bonus was $33 million.

Reger, in a statement released through his attorney, said he was an initial investor in Dakota Plains and that he was aware of the SEC investigation. "I have cooperated fully with the investigation and intend to continue to do so," Reger said. "I did not trade in Dakota Plains stock when it first became a public company in 2012, and I did not ask anyone else to trade."

Gilbertson, when asked if he believed anyone manipulated the stock, replied by e-mail: "Absolutely not." He said he didn't trade shares in the first 20 days, and that the time period became irrelevant because of a revision in how the payout period was applied. He said he has cooperated with the inquiry.

In its first comment about the investigation, Dakota Plains released this statement to the Star Tribune: "The company is fully cooperating with the SEC in the investigation into past trading irregularities in Dakota Plains stock at the time when the company went public in 2012. The company is not the target of the investigation." Company officials declined interviews.

Investment documents make clear that Gilbertson and other note holders made money, but didn't walk away with the initial windfall. It went on Dakota Plains' books as new debt. Investors were paid 12 percent interest on the new debt — payments totaling $2 million over nearly two years. That was on top of the 12 percent interest on the original $9 million principal, which eventually was repaid.

Company officials negotiated two revisions with the investors. Some of the debt was forgiven, and instead of pocketing the principal, investors traded it for shares in Dakota Plains. In the end, the promissory note holders got about 6.1 million shares, or about 11 percent of outstanding stock.

The deadly derailment in Canada of an oil train, the decline in oil prices and other factors have hurt the company's bottom line since 2012. A small-cap stock exchange recently warned it may delist the stock because of a $27 million stockholders' deficit and five consecutive quarterly losses.

Gilbertson said his 2 million shares are worth only about $200,000. He blamed the SEC investigation on a disgruntled former investor who not only complained to the SEC, but also harassed Reger, forcing him to get a no-contact court order in 2015. The SEC, which declined to comment for this story, has not said how the investigation got started or when it will finish, nor has it identified who made the trades that lifted the share price.

The investigation was made public in December when SEC attorneys sued Gilbertson's former wife, Jessica Medlin, in federal court to enforce a subpoena for information mainly about his investment activity. Medlin has cooperated with the investigation, and the lawsuit has been dropped, her attorney said.

When Dakota Plains was launched in 2008, Reger didn't become an executive of the new company, but his father and two business associates played key roles in the venture.

Reger, 39, whose family was in the oil business, remained at the helm of Northern Oil & Gas, which he had founded two years earlier with Gilbertson. That company invests in North Dakota oil leases and drilling projects, but doesn't own or operate drilling rigs. It pays for its share of drilling costs, and gets a share of the profit.

Reger ranked 32nd on the Star Tribune's list of 100 highest-paid Minnesota public company executives in 2014, with total compensation of $3.9 million. His pay declined to $2.4 million in 2015, according to the company's latest proxy statement. Like most oil companies, Northern Oil's bottom line has suffered from lower oil prices, but the company has survived.

The start-up oil transportation company, initially called Dakota Plains Transport, purchased and converted a railroad terminal in New Town, N.D., to load Bakken crude oil onto trains. Hauling crude oil in rail tank cars — a method little used for decades — soon became North Dakota's main means of exporting its oil bounty.

Reger's father, James Reger, was installed as Dakota Plains' first CEO, and Ryan Gilbertson's father, Weldon Gilbertson, became the president and treasurer. The two men, who received substantial stock awards, held those positions until early 2011. They did not return phone calls to comment.

Ryan Gilbertson said the two men were highly qualified to hold the top executive positions. His father, he said, had more than 30 years in the commodities business, and had just sold his brokerage and transportation business when Dakota Plains was formed.

Michael Reger initially invested in Dakota Plains through his company, Reger Gas Investments, investment records show. He transferred the ownership of the loans to his two young children, with a brother acting as custodian, four months before Dakota Plains went public, investment records show. He declined to say why that change was made.

One of Michael Reger's business associates, James Sankovitz, served as Dakota Plains' secretary and general counsel in 2009, according to a Dakota Plains' SEC filing. At the time, Sankovitz was general counsel of Northern Oil.

Sankovitz wasn't a direct investor in the Dakota Plains promissory note that ballooned in value. But an entity named 1242 Investments, whose managing partner is his spouse, Kristin Sankovitz invested $500,000, according to investment records reviewed by the newspaper. Neither returned telephone calls seeking comment.

Although Ryan Gilbertson had no official title with Dakota Plains, the SEC said in its December court filing that he "had substantial involvement with the company." In an e-mail to the newspaper, Ryan Gilbertson said he was "a founding investor."

Ryan Gilbertson, his son and his charity, Total Depth Foundation, held $3.5 million in the promissory notes in Dakota Plains that gained from the stock price spike. He resigned from Northern Oil in October 2012, but said his resignation had nothing to do with Dakota Plains.

A few weeks after Gilbertson quit, Sankovitz was terminated as Northern's chief operating officer, according a company filing with the SEC. The termination was "not for cause," under Sankovitz's employment contract, the company's filing said.

Other major Dakota Plains promissory note holders included Ken and Mark Evenstad, chairman and chief executive, respectively, of drug company Upsher-Smith, and Jack Norqual, a former equipment leasing company owner. They didn't return calls to comment for this story.

David Shaffer • @ShafferNews