Heartland Payment Systems LLC sued its former top executive, claiming he used his girlfriend to trade on inside information.
Robert Carr, then the payment firm’s chief executive officer and chairman, transferred about $1 million to Kathie Hanratty to purchase stock in the company before its $4.2 billion acquisition by Global Payments Inc. was made public in December 2015, according to a lawsuit filed by Heartland.
The pair made hundreds of thousands of dollars by purchasing stock at $79 a share and selling it at more than $100 a share, the payment processor alleged in a complaint filed Tuesday in Trenton, New Jersey, federal court.
Emails between the couple included discussions of Hanratty buying the stock, the price Global Payment was going to pay before it was made public, and setting up an account for the proceeds.
"I am at the bank opening my account and making you the beneficiary," Hanratty told Carr in a Nov. 18, 2015, email. A few days later, describing the account, she said: "I will treat your gift with respect and not squander a penny."
When the Financial Industry Regulatory Authority began investigating trading in the stock in December 2015, Carr also alerted Hanratty, and didn’t tell the regulator or his employer that he’d shared information with her about the deal, according to the complaint.
"We need to chat tonight — about FINRA. FINRA is researching stock purchases prior to Dec. 15," Carr wrote in an email to Hanratty on April 20, 2016.
"What is Finra?" Hanratty asked. Both communicated using corporate email addresses.
In a statement, a lawyer for Carr said Global Payments withheld information from the complaint that would show the executive didn’t act illegally. The money Carr gave to Hanratty was a gift he was able to provide by selling some of his own stock, said the attorney, Michael McGovern. The complaint also omitted emails showing a chief legal officer was aware of the trading activity, he said.
"What Global characterizes as a ’scheme’ by Bob Carr to profit illegally, was in fact a planned sale of Heartland stock, ahead of the Global acquisition, that resulted in a significant tax liability that exceeded the profit from Ms. Hanratty’s lawful investment," McGovern said. "Also, Global officials are fully aware that Mr. Carr sought and received prior authorization from Heartland’s chief legal officer for all of his stock transactions.”
Representatives from Global Payments didn’t immediately respond to a request for comment.
Aside from the allegedly improper trades, Carr personally made about $96 million in the merger, according to data compiled by Bloomberg from regulatory filings. His unvested equity awards were converted into about $52 million of cash and Global Payments stock, while his stake in Heartland Payment yielded about $44 million in cash and stock. The calculations are based on Global Payments’ close of $71.42 on the day the merger was announced.
A message left for Hanratty, at a Connecticut-based staffing firm she founded, wasn’t returned. Heartland is seeking damages from both for breach of fiduciary duty and breach of contract.
Global Payments agreed to buy its smaller rival Heartland Payment Systems Inc. in December 2015 amid a wave of consolidation in the card-processing industry. The deal helped Global Payments become one of the country’s biggest providers of services related to electronic transactions.
Carr left Heartland in 2016, according to his LinkedIn profile. The following year, he started another credit-card processor, Beyond, to be based in Princeton, New Jersey. He then tried to lure Heartland employees to his new firm, according to the lawsuit.
The case is Heartland Payment Systems LLC v. Carr, 3:18-cv-09764, U.S. District Court, District of New Jersey (Trenton).