Former Evercore Group LLC investment banker Frank Perkins Hixon Jr. had an unusual reason to trade on secrets he stole from clients, authorities said: he needed the money to pay child support to his ex-girlfriend.
Hixon, who was an Evercore managing director until January, was arrested yesterday and charged with insider trading. Separately, the U.S. Securities and Exchange Commission sued Hixon, 56, and his girlfriend, Destiny Robinson, 36, with whom he fathered a child, the regulator said. The trading earned almost $1 million, the SEC said.
“Text messages between Hixon Jr. and Robinson suggest he was generating the illegal proceeds in lieu of formal child support payments,” the SEC said in a statement.
Hixon, known as Perk, is among dozens of Wall Street professionals to be accused of insider trading. His arrest comes two weeks after U.S. prosecutors won the conviction of former SAC Capital Advisors LP manager Mathew Martoma. U.S. Attorney Preet Bharara has won 79 insider cases, and lost none, in a crackdown that began in October 2009.
Hixon, who lives in New York, is accused of using inside information to trade shares of three companies including Evercore, the investment bank founded by ex-U.S. Deputy Treasury Secretary Roger Altman. Robinson wasn’t the only beneficiary of his scheme, authorities said. Hixon also traded for the account of his father, an 80-year-old retiree.
“Another high-ranking financial official allegedly broke the law and abused his position,” George Venizelos, head of the FBI’s New York office, said in a statement.
Hixon faces eight counts including securities fraud and lying to FBI agents. Securities fraud carries a maximum penalty of 20 years in prison. Hixon was released on a $5 million bond after appearing in Manhattan federal court.
His lawyer, Bill Johnson, declined to comment on the arrest.
Robinson, who lives in Austin, and Frank P. Hixon Sr., of Johns Creek, Georgia, were sued by the SEC and not criminally charged. Hixon’s father didn’t immediately return a telephone call. Robinson, who according to the SEC has a 5-year-old child with Hixon, couldn’t be reached for comment.
Evercore fired Hixon in January after the company investigated trades linked to him, the firm said in a statement.
“We have never had a situation like this before in Evercore’s nearly 20-year history,” the firm said. “This conduct is completely inconsistent with our culture and professional standards.”
Hixon worked at Lazard Freres & Co. LLC from 2002 to 2010, according to the Financial Industry Regulatory Authority. He joined Evercore in 2010 to lead its mining, metals and materials advisory group.
Hixon’s scheme ran from October 2011 to January 2013, prosecutors said. He bought stock in Texas billionaire Harold Simmons’s Titanium Metals Corp., a maker of titanium used in the aerospace industry, before a November 2012 announcement that it would be acquired by Portland, Oregon-based Precision Castparts Corp. for $2.9 billion, they said.
Hixon learned of the deal on Oct. 23, 2012, after Evercore was asked to make a presentation to the Titanium board concerning a potential transaction, they said. He attended the meeting by teleconference from London.
“Hixon was invited to participate in the meeting because of his expertise in the metals industry,” according to a criminal complaint.
Within two hours, a brokerage account belonging to Robinson was accessed from London and bought 20,000 Titanium shares, authorities said. A week later, Hixon had a two-minute phone call with his father and purchased more shares, they said.
Hixon sold the stock beginning on Nov. 12, the day the deal was announced, from an online account he accessed from Austin, authorities said.
Hixon tried to hide his trades, according to the complaint. In early 2013, after Evercore circulated a list it received from Finra of persons who bought Titanium stock before the takeover, Hixon said he didn’t recognize any names on it.
Later, when “confronted” by Evercore, Hixon said he didn’t identify Robinson because he knew her by her nickname, and not her legal first name, authorities said.
He said he didn’t identify his father because he lived in a different but nearby Georgia town and because Hixon is a common name in the South, they said.
“Suspicious trading in Robinson and Hixon Sr.’s account appears to have stopped after Hixon Jr. was confronted in 2013 about his knowledge of his father’s trading,” the SEC said in its complaint. “Text messages suggest that Robinson was upset to lose her source of child support, and even threatened to sue him.”
Hixon also bought shares in Westway Group Inc., a liquid storage firm, while serving as Evercore’s senior managing director in charge of Westway’s business, prosecutors said. He began buying in October 2011 after Westway’s largest holder offered to buy components of its business, and he sold when the deal became public, they said.
Hixon traded in his own firm as well, prosecutors said.
“Hixon learned confidential information that his employer, Evercore, would announce record earnings for the fourth quarter of 2012,” according to the complaint. He “used this information” to buy shares.
The SEC said it won an emergency request freezing about $1.2 million in Robinson’s brokerage account, most of which represents proceeds from Hixon’s trading.
The case is U.S. v. Frank Perkins Hixon Jr., 14-mag-0341, U.S. District Court, Southern District of New York.