The abruptly ousted CEO of Northern Oil and Gas, Michael Reger, has fired back with a wrongful termination lawsuit against his former employer, claiming it reneged on an agreement to let him exit with a full severance package.
Wayzata-based Northern announced Tuesday it had fired Reger after federal regulators indicated they were pursuing an enforcement action against him for possibly violating securities law.
The federal investigation involves another company, Dakota Plains Holdings, in which Reger was an investor.
Northern, which said it has never held an interest in Dakota, claimed in a federal securities filing that it doesn't believe Reger will be entitled to any severance payments. Reger's lawsuit — filed late Tuesday in Minnesota's Fourth Judicial Court in Minneapolis — claims that the statement means Reger was wrongfully terminated for cause.
"Northern decided to terminate Mr. Reger's employment for reasons wholly unrelated to his performance or Northern's business," the suit said. "Under Mr. Reger's employment contract, such a termination without cause requires Northern to pay substantial severance to Mr. Reger, to vest certain unvested shares of Northern stock … and to provide other benefits."
Northern Oil did not return phone calls.
Reger, Northern's CEO since 2007, was a major participant in an investment deal at Dakota Plains, which is under investigation for suspected stock manipulation. Wayzata-based Dakota Plains is a publicly traded oil and sand transportation business. Northern, also publicly traded, invests in oil leases and drilling projects in North Dakota's oil fields.
Reger denied any wrongdoing in connection with Dakota Plains and said he has fully cooperated with the SEC.
On Aug. 11, Reger notified Northern that he had received a "Wells notice" from the SEC, which said SEC staff had made a "preliminary determination" to institute an enforcement action against him.
Northern received a subpoena from the SEC for certain company documents and decided to conduct its own investigation into Reger's involvement with Dakota Plains "in order to determine [his] fitness to continue as CEO," according to Reger's suit. "Northern's investigation did not conclude that Mr. Reger was unfit or unable to continue as CEO."
Reger claims Northern informed him he would be let go, but he would be provided with full severance benefits under his employment agreement for termination with cause. But he said in the lawsuit that as Reger and Northern approached a final agreement on Aug. 15, "Northern changed its strategy and began making new and wholly unreasonable demands," the suit said.
When Reger didn't agree, the company said it would terminate him for cause.
Reger is suing for breach of contract and defamation, saying that Northern's communication that he was terminated without benefits is "knowingly false and defamatory and made with malice." Reger is asking for damages of more than $50,000 and an order requiring Northern to make a "corrective" federal securities filing "stating the true facts relating to Mr. Reger's termination."
Reger, 40, was the second largest participant in a $9 million loan package that helped launch Dakota Plains in 2008. The SEC is looking at the promissory notes in conjunction with Dakota's 2012 public stock offering. The notes had an escalator clause that paid noteholders a bonus based on Dakota Plains' stock price during its first 20 days of trading. The shares quickly jumped to $12, stayed at or near that price for 20 days and then declined, never to reach that level again. For the $9 million in loans, the bonus was $33 million.
Dakota's shares are worth pennies today.