Federal authorities have been investigating a price spike in the stock in a Minnesota-based oil train loading company after it went public in 2012, resulting in an windfall for investors who held promissory notes with an unusual payout feature.
The investigation by the U.S. Securities and Exchange Commission (SEC) is focused on a $9 million loan by several individuals to Dakota Plains Holdings of Wayzata. Under the terms of the promissory notes, the note holders received bonus payments based on Dakota Plains' share price during the first 20 days after its stock began publicly trading in March 2012.
In a filing in U.S. District Court in Minnesota, the SEC said that after Dakota Plains went public through a reverse merger, its stock "rose to $12 per share on very light volume and stayed at or near $12 per share for almost exactly 20 days," entitling the note holders to $32.9 million. After the run-up in price, shares steadily fell and never rose anywhere near the $12 level.
Securities regulators have been looking into the matter since October 2014, but the investigation was disclosed only recently when government attorneys sought a court order to compel one investor to answer questions about her stock and promissory note transactions.
The investor, Jessica Medlin, is the former spouse of Ryan Gilbertson, CEO of Northern Capital Partners, a private equity firm based in Wayzata. According to the SEC, both of them engaged in 2012 Dakota Plains transactions. They had divorced the previous year.
At the time, Gilbertson also was president of Northern Oil and Gas Inc., which invests in North Dakota oil leases. Gilbertson left Northern Oil and Gas, also based in Wayzata, in October 2012, a few months after the events under SEC investigation.
Neither Medlin nor Gilbertson have been accused of wrongdoing by the SEC. The agency's Dec. 10 filing in federal court seeks an order to compel Medlin to answer questions and to hand over documents related to Dakota Plains transactions. She didn't show up for a November interview after months of requests by the SEC, the filing says.
Medlin said she turned over documents months ago to her former attorney, was surprised by the SEC filing and intends to cooperate. She also said she expects the case will be dismissed, but declined to answer questions when contacted by the Star Tribune.