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Wednesday, May 1, 2019

Former Heartland CEO settles with SEC

Robert O. Carr is something of a legend in the merchant acquiring space. An early entrant into the field, he led Heartland Payment Systems from an upstart to a $4 billion acquisition by leading acquirer Global Payments Inc.

Along the way he formed a foundation that helps put economically disadvantaged youth through college, wrote a book about the journey from his hardscrabble roots to millionaire entrepreneur, and took many of his competitors to task over lack of transparency in merchant pricing. While at Heartland Carr published the “Merchants Bill of Rights” and challenged others in the industry to adopt similar fair processing practices.

Then a year after Global purchased Heartland, Carr started another card processing company, Beyond. As he did with Heartland, Carr made transparency in pricing an underlying premise of Beyond. He also committed to designating all of his earnings from the new firm to fund the Give Something Back Foundation Inc., the college fund he set up in 2003 for economically disadvantaged youth.

But Carr’s largesse may have extended beyond helping kids go to college. The Securities and Exchange Commission last year filed a complaint in federal district court in Connecticut charging the former Heartland CEO, along with his long-time girlfriend, Katherine M. Hanratty, of an insider trading scheme.

Last week, Carr agreed to pay just over $250,000 in civil penalties to settle the case without admitting or denying the SEC’s allegations. Hanratty settled with the SEC last fall, without admitting or denying guilt. She paid a $250,000 penalty and forfeited the $250,000 profit she made on the alleged insider trading caper.

Further allegations

According to the SEC’s complaint, filed in July 2018, Carr provided Hanratty with insider information in the weeks leading up to the December 2015 announcement by Global that it was acquiring Heartland. He also gave Hanratty $1 million to open a brokerage account through which she could purchase Heartland stock. She purchased 8,500 shares of Heartland stock for roughly $79 per share and sold it a few months later (following the Global acquisition) for about $101 per share, realizing a gain in excess of 25 percent, according to the SEC’s lawsuit.

Carr’s settlement with the SEC still must be approved by the district court. But even then, his legal woes are not over. The SEC stated it may seek a court order barring Carr from serving as an officer or director of any SEC-regulated company.

There’s also a lawsuit pending against Carr in a federal district court in Trento, N.J., that mirrors closely the SEC’s allegation. That lawsuit, filed by Heartland, which now operates as a Global company, alleges Carr breached his fiduciary duties and contractual obligations to Heartland by disclosing insider information to Hanratty and funding her purchase of company stock. It wants Carr and Hanratty to forfeit any profits they made on the purchase and sale of Heartland stock. The company also claims in its lawsuit that Carr breached non-competition and non-solicitation provisions of the Global buyout with his startup of Beyond. end of article

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