Robert O. Carr

The story of Robert O. Carr and Heartland Payment Systems seemed to have a happy ending. From a headquarters on Nassau Street, Carr built the company from nothing into one of the largest payment processing companies in the country, selling it to Global Payments in 2016 for $3.8 billion. Along the way he started the Give Something Back foundation, a charity that has sent more than 1,000 underprivileged students to college, and wrote two books that touch on integrity in business.

But now that legacy is threatened by a lawsuit by Global Payments that accuses Carr of insider trading. The suit says that after Global Payments had offered to buy Heartland for $97.50 per share, but before the public knew about the potential deal, Carr e-mailed his girlfriend, Kathie Hanratty, and sent her a check for $1 million to buy stock. Hanratty then purchased the stock, which was then trading at $79 per share, and sold it after the official announcement for $101 per share — a 25 percent gain. She is also named as a defendant in the lawsuit.

Carr, through a lawyer, denied wrongdoing. Michael McGovern of New York firm Ropes & Gray called the suit a “smear campaign and an anti-competitive initiative thinly disguised as a lawsuit” and said the accusation leaves out crucial information.

In December, 2015, Carr told U.S. 1 that the sale came about because Carr and Global Payments CEO Jeffrey Sloan met at a conference and negotiated in secret for several months before news broke of the potential deal on December 10. (U.S. 1 December 23, 2015.) The lawsuit relies heavily on e-mails between Carr and Hanratty. The suit includes an e-mail that Carr sent to Hanratty from his company address on November 9 of that year. It says: “Just landed back in Philadelphia . . . Meeting was good. Price is $97.50 and closing would be late December.” Hanratty replied, “Wow quite an offer.”

Hanratty, a Connecticut resident, has a LinkedIn profile listing her occupation as owner of Jaci Carroll Staffing Services since 1976. The lawsuit includes e-mails from Hanratty that use her corporate Jaci Carroll address.

In a subsequent e-mail on November 17, Hanratty writes: “Arrangements are made to purchase the HPY stock as soon as the out of state check clears, I am following your advice to the letter … I have never felt so free from stress and worry (that stuff you don’t believe in LOL) in my entire life.” Carr replied: “It’s all good!”

(The sum of the alleged insider trade was paltry compared to what Carr made from the sale above board. Bloomberg calculated from regulatory filings that he personally made $96 million from the merger.)

The suit accuses Hanratty of depositing the stock sale profits in a bank account of which Carr was the beneficiary.

Further accusations against Carr include concealing this trade from Global Payments and regulatory authorities when they asked whether anyone provided information to Hanratty.

According to the suit, in March, 2016, the Financial Industry Regulatory Authority (FINRA) made inquiries of HPS because of “suspicious trades” before the announcement and specifically asked about Hanratty.

In another e-mail exchange, Carr warns Hanratty that FINRA is investigating stock sales that took place before December 15. “What’s Finra?” she replied.

The SEC is also investigating the sale.

In response, Carr’s lawyer, Michael McGovern, released a statement:

“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. 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.”

McGovern said that the transactions Carr conducted make no sense as an insider trading scheme. “Global’s insider trading theory is patently illogical,” he wrote. “As Global well knows, Mr. Carr financed his gift to Ms. Hanratty by selling Heartland stock and the paying hundreds of thousands of dollars in capital gains tax on that sale — a tax liability that far exceeded any profit that Ms. Hanratty subsequently earned by buying that stock back in the marketplace.” He said Carr had to pay $330,000 in taxes compared to Hanratty’s $225,000 profit.

“If the two of them were engaged in insider trading as a way to make money, that would not be the way to do it,” McGovern said. “You don’t sell stock to go back and buy it and make less money. You would have to be an idiot to do it that way.”

McGovern also said Carr consulted with Global’s corporate counsel on the deals.

The suit also accuses Carr of breaching a non-compete clause in his contract by founding another payment company, Beyond, in 2017.

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