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Heartland Payment Systems Inc. says its chairman and CEO, Robert O. Carr, had no knowledge of the processor's security breach when he sold shares of the company last fall. Web site SeekingAlpha.com questioned the timing of some of Carr's share sales following the company's disclosure of breach of its processing network last year. Princeton, N.J.-based Heartland disclosed last week that hackers planted malicious software on its network in fall 2008 that captured an undisclosed amount of transaction data (CardLine, 1/20). On Aug. 8, Heartland had announced Carr filed a plan that enables company insiders to set up automatic share sales in advance. Called 10b5-1 plans based on Rule 10b5-1 by the U.S. Securities and Exchange Commission, the plan enables insiders to make such sales regardless of whether they have material nonpublic information. At the time of Heartland's August announcement, Carr held approximately 2.4 million Heartland shares. The plan enabled Carr to sell as many as 1 million shares over the next year, Heartland said. According to SEC filings, between Aug. 13 and Jan.7, Carr sold 900,971 at prices ranging from $13.52 per share to $25.52 per share. A statement Heartland released today says Carr was under no trading restrictions at that time and had no material nonpublic information about the company. "Under this 10b5-1 plan, programmed sales of company stock were made on Mr. Carr's behalf, and he had no discretion concerning the timing or other aspects of those sales," the statement reads. Heartland says it first learned of a potential problem with its network on Oct. 28, when the major card brands contacted the processor. Heartland confirmed the security breach the week of Jan. 12, a Heartland spokesperson says, and shortly after that Carr terminated the 10b5-1 plan because of the circumstances. "Heartland categorically denies that Mr. Carr was aware of a potential security breach at the time he adopted his trading plan," the statement says. Heartland's stock closed at $14.18 on Jan. 20, when the processor disclosed the breach, and closed yesterday at $9.01.
