Federal investigators are looking into stock trades linked to the former CEO of the FinTech firm Heartland Payment Systems.
According to The Wall Street Journal, the trades in question were revealed as part of a breach-of-contract lawsuit that Heartland, now part of Global Payments, filed against its founder and former CEO, Robert Carr, in federal court in New Jersey.
Global Payments acquired Heartland two years ago for $3.8 billion.
The lawsuit alleges that after Carr started meeting with Global Payments, he emailed his girlfriend from his corporate email address to say that Global would offer to buy Heartland for $97.50 per share.
He then transferred around $1 million to a bank account in her name so she could buy Heartland stock before the deal was made public. Carr’s girlfriend purchased the stock when it was trading at around $79 per share, and subsequently sold the shares for around $101 each after the deal was announced, a gain of more than 25 percent.
Heartland also alleged that Carr misled both the company and Wall Street’s self-regulatory body, the Financial Industry Regulatory Authority (FINRA), “in an effort to conceal his unlawful insider trading.”
Carr is cooperating with the federal investigation by the Securities and Exchange Commission (SEC) and the Justice Department. He “is confident that the facts will confirm that he acted appropriately,” his attorney, Michael McGovern of Ropes & Gray, said in an email.
Carr founded Heartland in 1997 as a small payments processing startup based in Princeton, New Jersey. By 2015, it was generating $2.77 billion in annual revenue.
Carr left Heartland after the sale and co-founded a competing payments startup called Beyond Inc. According to the lawsuit, Carr also violated a noncompetition provision in his prior employment agreement with Heartland.
Mr. Carr’s attorney said “key facts are misrepresented in the lawsuit” and “critical exculpatory information known to [the company] was intentionally withheld.” He added that Heartland’s accusations amount to “a smear campaign and an anti-competitive initiative thinly disguised as a lawsuit."