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(Reuters) — The U.S. Securities and Exchange Commission on Tuesday charged the former chief executive of Heartland Payment Systems Inc. with insider trading for tipping off his longtime romantic partner about the payment processor's $4.3 billion takeover by Global Payments Inc.
Robert Carr, 73, who was also Heartland's founder, was accused of repeatedly discussing the late-2015 merger talks with Katherine Hanratty, whose relationship with him had begun in 2011. He was also accused of having given her a $1 million check, with instructions to open a brokerage account and buy $900,000 of Heartland stock.
The SEC said Ms. Hanratty, 65, who was also charged, did what Mr. Carr asked, and sold her stock for a $250,628 profit in April 2016, four months after Atlanta-based Global Payments agreed to buy its smaller rival.
Ms. Hanratty, who co-owns a staffing agency, had repeatedly expressed concern to Mr. Carr about her finances, and after opening the brokerage account, which named Mr. Carr as the beneficiary, emailed him that "for the first time ever I feel a sense of relief knowing that I have some security," the SEC said.
Global Payments agreed on Dec. 15, 2015, to buy Princeton, New Jersey-based Heartland for $100 per share, a 17.5% premium, and more than 28% above where it traded on Dec. 9 before media began reporting a possible merger.
The SEC said Mr. Carr, of New London, New Hampshire, had bragged to his children and their spouses that a merger was in the works, and given Ms. Hanratty, of Watertown, Connecticut, a draft quotation for the press release announcing it.
"Love it," replied Ms. Hanratty, even as she suggested an improvement, the SEC said.
The SEC complaint filed with the federal court in New Haven, Connecticut, seeks civil fines, the recouping of illegal profit, and an officer and director ban for Mr. Carr.
Lawyers for the defendants could not immediately be identified. Mr. Carr could not be reached for comment. A call to Ms. Hanratty was not answered. The SEC did not respond to requests for comment.
Global Payments was not accused of wrongdoing, and did not immediately respond to requests for comment.
The case is SEC v. Carr et al., U.S. District Court, District of Connecticut.
New cyber security guidance issued by the U.S. Securities and Exchange Commission warns publicly held companies’ boards of directors to be alert to insider trading and the need to implement cyber security procedures and protocols.