Manhattan U.S. Attorney and FBI Assistant Director in Charge Announce Insider Trading Charges Against Former Senior Managing Director of Investment Bank
|U.S. Attorney’s Office February 21, 2014|
Preet Bharara, the United States Attorney for the Southern District of New York, and George Venizelos, the Assistant Director in Charge of the New York Office of the Federal Bureau of Investigation (FBI), announced today the unsealing of a criminal complaint charging Frank Perkins Hixon, Jr., a former senior managing director of Evercore Group LLC, a subsidiary of Evercore Partners Inc. (Evercore), with insider trading offenses. Specifically, Hixon is alleged to have used inside information to trade and cause others to trade in the securities of Evercore, Westway Group Inc. (Westway), and Titanium Metals Corporation (Titanium). Hixon is also charged with making false statements to FBI agents. The defendant was arrested on these charges this morning at his apartment in New York, New York, and presented this afternoon in Manhattan federal court.
Manhattan U.S. Attorney Preet Bharara said, “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. In this case, the alleged wrongdoing was compounded when Hixon tried to evade detection by lying to investigators and to his company.”
Assistant Director in Charge George Venizelos said, “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. The alleged use of material information gleaned through confidential meetings at Evercore was deceptive and more importantly illegal. When Hixon was confronted about his back door trades, he allegedly doubled down and lied to the FBI agents who interviewed him. The integrity of our markets remains a paramount concern of the FBI. We’ll continue to pursue these cases until that message is crystal clear.”
According to the allegations contained in the complaint unsealed today in Manhattan federal court:
Between April 2010 and January 2014, Hixon was a senior managing director with the Mining and Metals Group of Evercore Group LLC. Hixon used material non-public information that he acquired as part of his employment with Evercore to trade and cause trades in brokerage accounts belonging to the mother of his young child (Individual A), who lived in Austin, Texas, and to Hixon’s close relative (Individual B), who lived in Johns Creek, Georgia.
In 2011, Hixon led an Evercore team in advising Westway about a non-public offer from another company (Company A) to purchase some of its business components and, more generally, in connection with potential transactions concerning Westway’s other business components. Company A’s offer was made in early September 2011, and a special committee was formed around that time to consider the offer and other strategic alternatives. Those developments were not announced publicly until December 15, 2011. Meanwhile, between October 21 and December 15, 2011, Hixon purchased and caused to be purchased 229,000 shares of Westway for Individual A’s brokerage account by logging into Individual A’s account from various locations, including Evercore’s Manhattan office. As the negotiations for the contemplated Westway transactions became protracted, Hixon sold and caused to be sold about 140,000 of the Westway shares that had accumulated in Individual A’s account for a profit of approximately $260,000.
In October 2012, Hixon was invited, along with other Evercore personnel, to meet with a special committee of Titanium’s board of directors to discuss a potential engagement in connection with an unspecified $3 billion transaction. At the October 23, 2012 pitch meeting, which Hixon attended by teleconference from London, England, Hixon and the rest of the Evercore team learned that the transaction being considered was an acquisition of Titanium by Precision Castparts Corp. (PCP), a manufacturer of complex metal components and products. Hixon also learned the approximate offer price and that the transaction was likely to close before year’s end.
Within approximately one hour of the meeting with the special committee, Hixon began buying 20,000 Titanium shares for Individual A’s account from a mobile device traced back to London, England. Eight days later, 20,000 more shares of Titanium were purchased for Individual A’s account. Most of the logins to the account corresponding with these purchases traced back to Evercore’s Manhattan office. That same day, 15,000 shares were purchased for Individual B’s account. After market close on November 9, 2012, Titanium announced PCP’s tender offer for its shares. The next trading day, November 12, 2012, all 40,000 of Individual A’s shares of Titanium were sold for a profit of approximately $180,000. Later that month, Individual B’s Titanium shares were sold for a profit of approximately $72,350.
On January 14, 2013, Hixon attended an Evercore partnership meeting at which he learned that Evercore would be announcing record financial results for the fourth quarter of 2012. After the partnership meeting that day, Hixon spoke to Individual B by phone. During the two days preceding the bank’s January 30, 2013 announcement, Hixon, logging into Individual A’s account from Evercore’s Manhattan offices and from his home in Manhattan, bought 27,000 shares of Evercore for the account. Meanwhile, the day before the announcement, 10,000 shares of Evercore were purchased for Individual B’s account. After Evercore’s earnings release, Individual A and Individual B sold all the Evercore shares the next day and reaped a combined profit of approximately $94,700.
In February 2013, Evercore asked Hixon to respond to a request from the Financial Industry Regulatory Authority (FINRA) and to identify any known names from a list of people and entities who had traded in Titanium stock prior to PCP’s tender offer. Although Individual A and B were both on the FINRA list, Hixon responded by e-mail, “No known relationships.”
When Evercore confronted Hixon about his failure to identify Individual A—who, as noted above, is the mother of his young child—Hixon claimed not to know Individual A by her legal name, which was what appeared on the FINRA list, and to know her only by a different name she uses. Documents produced by Evercore, including text messages and e-mails between Hixon and Individual A, make clear that Hixon had, in fact, long been aware of Individual A’s legal name. Bank records show that he wrote numerous large checks to Individual A, in her legal name, from 2009 to 2010. On January 28, 2014, Hixon met with two FBI agents and told them, among other things, that he had never traded in or even accessed Individual A’s brokerage account.
When Evercore confronted Hixon about his failure to identify Individual B, his close relative, Hixon responded that the associated location given for Individual B on the FINRA list—Duluth, Georgia—was inaccurate, because Individual B lives in Johns Creek, Georgia. Johns Creek shares a zip code with portions of Duluth and was only incorporated as its own city in December 2006. The city reflected on the brokerage account statements for Individual B’s account is Duluth.
Hixon, 55, of New York, New York, has been charged in the complaint with five counts of securities fraud (counts one through three, five, and six), two counts of securities fraud in connection with a tender offer (counts four and seven), and one count of making a false statement (count eight). The securities fraud and fraud in connection with a tender offer charges each carry a maximum term of 20 years in prison, and the false statement charge carries a maximum term of five years in prison. The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Mr. Bharara praised the investigative work of the FBI and thanked the Securities and Exchange Commission, which has filed civil charges in a separate action. Mr. Bharara also thanked Evercore for its cooperation in this matter.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Sarah E. McCallum is in charge of the prosecution.
The charges contained in the complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
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