The Securities and Exchange Commission today announced that it has issued proceedings for insider trading against Roy Cook, a former board member of Tallgrass Energy LP, and four of his friends for trading on material non-public information in advance of a public announcement that Blackstone Infrastructure Partners had offered to acquire Tallgrass and take it private.

Cook learned in late July 2019 that Blackstone, which had acquired 44 percent of Tallgrass’s public shares earlier that year, was planning to make an offer to acquire the remainder of Tallgrass’s publicly traded shares. Within weeks of learning that information, Cook allegedly tipped off his friends, Jeffrey Natrop, Peter Renner, James Rudolph, and Peter Williams, who all purchased Tallgrass securities prior to a public announcement of Blackstone’s offer.

The complaint alleges that Natrop and Renner, who were friends and business associates of Cook’s, purchased Tallgrass call options on August 8 and 9, 2019, which resulted in illicit profits of USD43,862 for Natrop and USD13,520 for Renner. The complaint further alleges that Cook tipped off Rudolph while the two were in the Bahamas celebrating Rudolph’s birthday on Rudolph’s yacht and that Rudolph purchased Tallgrass stock on August 6, 2019, which resulted in illicit profits of USD31,035. The complaint also alleges that Cook tipped off Williams, his long-time friend and personal accountant, and that Williams purchased call options on August 19 and 21, 2019, which resulted in illicit profits of USD463,000.

Following the August 27 announcement, which saw Tallgrass shares increase by 36 percent, Cook served for several months as chairman of a Tallgrass Conflicts Committee tasked with assessing Blackstone’s offer and negotiating the final terms of the transaction. In connection with this role, Cook allegedly learned material non-public information about the status of the negotiations that he communicated to Williams, who purchased Tallgrass stock in a Cook family trust account over which he had trading authority, resulting in USD88,800 of illicit profits for Cook. The complaint further alleges that, on December 10, 2019, while on vacation in Chile, Cook gave Williams more material non-public information about the status of the negotiations, and Williams purchased more call options in his personal account, resulting in additional illicit profits of USD61,525.

“As our complaint alleges, Roy Cook took advantage of his position as a Tallgrass director to repeatedly enrich himself and his friends,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement.

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