He traded in Titanium stock, so really, this picture is practically appropriate. Source: Science Picture Co via Getty Images
He traded in Titanium stock, so really, this picture is practically appropriate. Source: Science Picture Co via Getty Images

The insider trading charges filed today against F. Perkins Hixon Jr., a former senior managing director at Evercore who goes by "Perk," raise so many questions. But my first question after reading the criminal and SEC complaints was: How much does a senior managing director at Evercore get paid?1 Hixon is accused of insider trading in three situations between October 2011 and January 2013, making a total profit of about $609,000 (per the FBI) or $950,000 (per the SEC). Now don't get me wrong, if you gave me $609,000, I would take it, but, one, I bet he makes more money than I do, and two, I would not risk jail for it.

The thing about insider trading is that it is dumb dumb dumb dumb dumb, and it is dumb because you'll probably get caught, and then what will your $609,000 do for you? I don't get it. Those three situations where Hixon allegedly insider traded are (1) trading in Titanium Metals Corporation in October 2012, before Titanium announced that it was going to be acquired but after Hixon and his team had pitched Titanium on representing them in the acquisition, (2) trading in Evercore stock ahead of Evercore's announcement of record 2012 earnings in January 2013,2 and (3) trading in Westway, Hixon's client, in 2011, before Westway announced that it was being acquired in a complicated deal on which Hixon advised. Why would you insider trade in your own deals, or your own company? You work at a bank! You hear stuff all the time! Insider trade in someone else's deal. (Or, I mean, not at all, but not your deal, come on.)

Of course that raises the possibility that Hixon didn't do it. And, to be fair, Hixon doesn't seem to have gotten the money: All the trades were in the accounts of his father, Frank P. Hixon Sr., a retiree who live outside of Duluth, Georgia, or the mother of Hixon's child, whose name is Destiny Wind Robinson, though she goes by Nicole. Perk and Destiny broke up in 2008 and she lives in Texas, though Hixon visits regularly from New York. Maybe they did the insider trading? Maybe there was no scheme -- it's not like they gave him the proceeds of their trading, did they? (Umm, a little: Per the SEC, Hixon's father wrote him a check for $38,000 on the day his Titanium trades settled, though who knows why.) Maybe they just guessed what was going on by, like, watching his body language? "Hmm, he looks pretty cheerful, must have been record earnings," that sort of thing?

Maybe? But the thing about the FBI is, they're pretty good at investigating. For instance, when Evercore pitched Titanium:

According to SMD-2, MD-1, and HIXON's electronic calendar, HIXON attended the October 23, 2012 meeting by teleconference from an office of a U.S. law firm located in London, England, where HIXON was traveling on other business. HIXON and SMD-2 did most of the speaking on Evercore's behalf during the meeting.

What else happened on October 23 in London?

At approximately 12:15 p.m. EST, and then again at approximately 12:36 p.m. EST and 1:27 p.m. EST, on October 23, 2012, the Individual A Account was accessed over the Internet from an IP address in London, England. The Individual A Account was not accessed from any other location on October 23, 2012. Through the accesses from London on October 23, 2012, 20,000 shares of Titanium were purchased for the Individual A Account.

(Individual A is Destiny Robinson.) And what did not happen on October 23 in London?

I have reviewed governmental travel record databases, and have found no record of travel by Individual A to England in or around October 2012.

Governmental travel record databases: Great for catching terrorists, and also insider traders.

(Also, later Robinson's account was accessed "from an IP address assigned to Evercore's Manhattan office" while Hixon was in New York, and later from an IP address in Austin when he was in Austin.)

Most embarrassing of all, perhaps, is that the Financial Industry Regulatory Authority does a lot of spot-checking on mergers. So in early 2013, Finra sent everyone at Evercore a list of everyone who had traded in Titanium stock in the weeks leading up to the merger announcement. Perkins's father, and the mother of his child, were on that list. "In a February 14, 2013 e-mail communication responding to Evercore's request that he identify known individuals or entities on the FINRA Titanium List, HIXON replied: 'No known relationships.' " Oops!

To be fair, Hixon has some great excuses, claiming that he "did not know" Robinson "by the name appearing on the FINRA Titanium List but knew her instead by her preferred first name," which is Nicole. Also, he points out that his father lives in Johns Creek, Georgia, not in next-door Duluth, which is where Finra's Frank P. Hixon Sr. was listed as living. Uhhh ... okay? This sounds like a magic-words theory of criminal liability, something like "You asked me if I knew Frank P. Hixon Sr. of Duluth, Georgia, but I only know a Frank P. Hixon Sr. of a suburb of Duluth, Georgia, and there are a lot of Frank P. Hixons walking around, including me. So I said no, gotcha." No, Perk, they got you.3 (Allegedly!)

I don't know. Don't insider trade, is the moral of this story. There's a well-oiled machine designed specifically to catch friends and relatives of M&A investment bankers who trade on those bankers' deals, so if you are an M&A banker, probably don't have your friends and relatives trade on your deals. More than that, the technology that has made passing paper bags full of cash in parking lots obsolete as a method of insider trading has also made it really easy to get caught. Your IP address is always logged! Your phone records can be pulled! The government knows where you fly! Don't do it. It's not worth it.

I've been critical, in the past, of the immense energy that the government has devoted to cracking down on insider trading. I still basically think that, but at the same time, credit where it's due, the government has gotten pretty good at catching insider trading. Which is the weirdest part of this story: The government is so good at catching insider trading that you'd really think it would deter insider trading. Especially among sophisticated bankers who know about all of the high-profile insider trading enforcement efforts. So why do they keep (allegedly!) catching insider traders?

1 Here is a story mentioning revenues of $10.3 million per senior managing director and a 59 percent compensation ratio, so figure just over $6 million of pay for each senior managing director and his team, combined. If the SMD gets, I dunno, a little less than half of that, then figure the typical SMD makes $2-3 million a year. I don't know if Hixon is a particularly lucrative SMD or not.

2 Two things about that:

  1. Hixon learned about the record earnings at an Evercore partners' meeting on January 14, 2013. The earnings were announced on the morning of January 30. That's ... kind of a long time to let every Evercore partner have that information without making it public?
  2. "Evercore fired Hixon in January after the company investigated trades linked to him, the firm said in a statement," but didn't disclose it? Material? Discuss.

3 And they even charged him with a separate crime (Count 8) of lying to the FBI, because he met with the FBI and denied the insider trading. That just seems mean.

To contact the writer of this article: Matt Levine at mlevine51@bloomberg.net.

To contact the editor responsible for this article: Tobin Harshaw at tharshaw@bloomberg.net