Ex-Evercore Managing Director Charged With Insider Trading

It might have been little more than a tabloid curiosity: A married New York investment banker has a child with a woman in Austin, Tex., and the couple goes through a breakup.

But that relationship has now drawn the interest of federal prosecutors and the Securities and Exchange Commission, who claim that the banker, Frank Perkins Hixon Jr., used a brokerage account under his former girlfriend’s name to commit insider trading from 2011 until last year. The S.E.C. further claims that the trading was meant, in part, to support the child.

Mr. Hixon, known as Perk, a former senior managing director in the mining and metals group of the investment bank Evercore, has been charged with seven counts of securities fraud and one count of lying to government agents, according to a criminal complaint unsealed on Friday in United States District Court in Manhattan. He was arrested Friday morning.

In a parallel action, the S.E.C. is seeking financial penalties and the disgorgement of the trading profits. The agency said a judge had granted its request to freeze the account belonging to Mr. Hixon’s former girlfriend, Destiny Robinson, who is known as Nicole.

Equipped with sensitive information he obtained through his job, Mr. Hixon made trades in the stocks of three companies using Ms. Robinson’s account, and he tipped off his father in Georgia who traded in two of the companies, prosecutors and the S.E.C. claim. The suspected insider trades, including in the stock of Evercore itself, yielded almost $1 million in profits, the government contends.

Mr. Hixon, 55, who joined Evercore in 2010 after working at Lazard and Credit Suisse First Boston, was fired last month, Evercore said on Friday.

The investment bank said it reported its concerns about the suspicious trades to regulators and performed an internal investigation, which revealed violations of the firm’s policy. Evercore called Mr. Hixon a “rogue employee.”

“We have never had a situation like this before in Evercore’s nearly 20-year history — this conduct is completely inconsistent with our culture and professional standards,” Evercore said in a statement. “As we continue to cooperate fully with the authorities, we want to make clear that we have zero tolerance for actions that violate our most cherished principles and the trust our clients and shareholders place in us.”

In an interview with two F.B.I. agents last month, Mr. Hixon denied trading on information he learned through his work or tipping off anyone else, according to the complaint. He said that he never traded in or had access to Ms. Robinson’s account and that he was not aware that his father had traded in the stock of the companies in question, the criminal complaint says.

A lawyer for Mr. Hixon did not immediately respond to a request for comment.

Prosecutors contend that Mr. Hixon profited on the type of nonpublic information that investment bankers handle in the regular course of their work, and which they are forbidden to trade on. But this case has a personal dimension, involving Mr. Hixon’s former girlfriend and their young child, who was born in 2008.

Ms. Robinson, who is 36, moved that year to Austin from New York while pregnant, according to the S.E.C.’s complaint. She opened the brokerage account in April, about four months before her child was born, the criminal complaint says. Mr. Hixon told the F.B.I. agents that his relationship with Ms. Robinson ended around the time of the birth.

The following year, Mr. Hixon wrote Ms. Robinson $10,000 checks monthly, the criminal complaint says. According to the S.E.C., text messages between Mr. Hixon and Ms. Robinson suggest that the illegal trading was intended, at least in part, to support the child.

Mr. Hixon, a well-known banker on Wall Street who grew up in Tennessee, lives in New York and Rhode Island. He graduated from the University of Virginia and Harvard Business School, where he met his wife, Marguerite Lammot Lee.

At 6-foot-7, Mr. Hixon cuts an imposing figure. He is an opera fan, subscribing to the top class of box seats at the Metropolitan Opera, which afford ample legroom, he told The New York Times in 2012.

One suspicious episode began in 2011, when Mr. Hixon was representing Westway, an animal feed and bulk liquid storage company in New Orleans. In September, the largest shareholder of Westway offered to buy certain parts of the business, an offer that was not public, and Mr. Hixon met with a special committee of Westway’s board to discuss it, according to the criminal complaint.

In the final months of that year, Ms. Robinson’s account bought 229,000 shares of Westway, with many of the purchases corresponding to a computer in Evercore’s Manhattan office, the complaint says. Two purchases occurred when Mr. Hixon was scheduled to be in a conference call about the company.

Westway’s stock rose when it disclosed the original offer in December 2011 and, a few days later, a separate offer from a different company. Throughout 2012, as it looked increasingly likely that Westway would do a deal, the brokerage account sold thousands of shares, reaping profits of about $260,000, the complaint says.

By October 2012, when Mr. Hixon’s child was 4 years old, the banker had turned his focus to another company, the Titanium Metals Corporation, prosecutors say. Evercore was invited in October to work with the company’s board, gaining access to information that was not public.

After learning that Titanium Metals would soon be acquired by Precision Castparts, a manufacturer of parts for aircraft engines and industrial gas turbines, Mr. Hixon bought 40,000 shares of Titanium Metals for Ms. Robinson’s account and tipped off his father, Frank P. Hixon Sr., to buy 15,000 shares, prosecutors and the S.E.C. say.

The acquisition, through a tender offer at a significant premium, was announced in November. The shares in the two accounts were sold soon after the announcement, yielding profits of $180,000 and $72,350, respectively, according to the government.

The suspicious activity includes trades in the stock of Mr. Hixon’s employer. In January 2013, during an Evercore partnership meeting, Mr. Hixon learned that the firm would announce strong earnings for the fourth quarter of 2012. He subsequently bought 27,000 shares of the firm for Ms. Robinson’s account and called his father, who bought 10,000 shares, according to the complaint.

The shares were sold after Evercore reported its earnings, yielding profits of $68,700 for Ms. Robinson’s account and $28,000 for his father’s account.

The trading appears to have stopped in 2013, after Mr. Hixon was confronted about his knowledge of his father’s trading, according to the S.E.C. Text messages suggest that Ms. Robinson “was upset to lose her source of child support, and even threatened to sue him,” the S.E.C. said.

When confronted by Evercore, Mr. Hixon denied knowing Ms. Robinson and denied that an individual with his father’s name was his father, the S.E.C. says. Later, Mr. Hixon said he did not know Ms. Robinson by her legal name, Destiny, and he explained that he had not identified his father because the city where the man was said to live, Duluth, was technically not where his father lived at that time, since his father’s area had recently been incorporated as a separate town, according to the S.E.C.

“This statement was, at best, misleading,” the S.E.C. said.

In an interview with two F.B.I. agents last month, Mr. Hixon lied about the trades in Ms. Robinson’s account, prosecutors claim.

“As we have often said, those like Frank Perkins Hixon, Jr., who illegally manipulate the market by allegedly trading on material non-public information exploit law-abiding investors and traders,” Preet Bharara, the United States attorney in Manhattan, said in a statement. “In this case, the alleged wrongdoing was compounded, when Hixon tried to evade detection by lying to investigators and to his company.”