UPDATE 3-Former Evercore director charged with insider trading
NEW YORK Feb 21 (Reuters) - U.S. authorities on Friday accused a former investment banker at Evercore Group of engaging in insider trading, and a federal regulator said he used the money to pay a former mistress to support their child.
Frank Perkins Hixon Jr, 55, a former senior manager at Evercore, was accused of using inside information to arrange trades in the stocks of Evercore and two other companies in accounts held by Hixon's ex-girlfriend and his father, according to court records.
The other two companies were Westway Group, which merged last year with EQT Infrastructure II, and Titanium Metals Corp, which was purchased last year by Precision Castparts Corp.
A criminal complaint identified the holders of the accounts as the mother of Hixon's young child in Austin, Texas and a close relative in Johns Creek, Georgia. The U.S. Securities and Exchange Commission in a parallel lawsuit, said the accounts belonged to Destiny Wind Robinson, Hixon's former girlfriend, and Frank Hixon Sr, his 80-year-old father.
The criminal complaint said the trades brought Hixon more than $600,000 in profits, while the SEC's civil case put Hixon's profits as $950,000.
"This is the same old song: Another high-ranking finance official allegedly broke the law and abused his position in a thinly veiled attempt to make illegal trades," FBI Assistant Director-in-Charge George Venizelos said in a statement.
$5 MILLION BAIL
Hixon, who worked in Evercore's mining and metals group, was arrested Friday morning at his apartment in New York. He was charged with five counts of securities fraud, two counts of securities fraud in connection with a tender offer and one count of making a false statement.
At a hearing Friday afternoon in New York, a federal magistrate set bail at $5 million. The SEC, meanwhile, obtained an order from a judge in Texas freezing $1.2 million held in Robinson's account.
William Johnson, a lawyer for Hixon at King & Spalding, declined comment. Neither Hixon's father nor a lawyer for Robinson responded to requests for comment.
George Sard, a spokesman for Evercore, issued a statement saying the company reported its concerns to regulators and launched an internal investigation that ultimately led in January to the termination of Hixon, who he called a "rogue employee."
"We have never had a situation like this before in Evercore's nearly 20-year history," Sard said.
The case was the latest in a string of insider trading prosecutions by the office of Manhattan U.S. Attorney Preet Bharara in a crackdown that has resulted in the convictions of 79 individuals.
According to court papers, the fraud was detected after Evercore received inquiries in early 2013 from the Financial Industry Regulatory Authority.
Evercore confronted Hixon about whether he knew anything about trading in accounts belonging to Robinson and his father Frank Sr, the SEC said. Hixon denied recognizing either name, the SEC said.
Confronted again with information that he did know them, Hixon falsely claimed he knew Robinson, whose legal name is Nicole, by a different first name and didn't recognize the name of the city his father lived in, the SEC said.
The criminal complaint said Hixon sent Robinson checks for $10,000 a month for at least a year, written to her in her legal name.
Hixon, who is married, told authorities he had ended his relationship with Robinson around the time their child was born, in 2008, according to the criminal complaint.
Text messages between the two suggest the illegal trading was intended at least partly to support their child, the SEC said.
According to the criminal complaint, in late 2011, as executives from Westway Group, a New Orleans-based liquid storage and feed company, discussed their merger plans with Evercore's mining and metals team, Robinson's online trading account registered trades in Westway shares made by someone logged in from a computer at Evercore's Manhattan offices.
Similar activity in Robinson's account in shares of Titanium Metals Corp also corresponded with Hixon's work on the Titanium Metals Corp merger.
According to the court documents, Hixon also coordinated with his father on trades in the stocks, calling him after learning information about the mergers and about Evercore's financial results.
The criminal case is U.S. v. Hixon, U.S. District Court, Southern District of New York, No. 14-mj-0341. The civil case is U.S. Securities and Exchange Commission v. Hixon, U.S. District Court, Western District of Texas, No. 14-158.