Former Health-Care Banker Convicted of Tipping Father on Deals -- Update
August 17 2016 - 4:47PM
Dow Jones News
By Christopher M. Matthews
A former managing director at Perella Weinberg Partners LP was
convicted Wednesday of insider trading on allegations he tipped his
father on pending health-care deals.
Prosecutors alleged that Sean Stewart began tipping his father
as early as 2011, when he was vice president in the health-care
investment banking group at J.P. Morgan Chase & Co.
Mr. Stewart passed on information about several health-care
mergers, prosecutors said, and continued doing so after he moved to
Perella in October 2011. They said he thought his father was in
financial trouble and provided the tips to help him.
His father, Robert Stewart, and another involved in the scheme,
Richard Cunniffe, made more than $1 million in illegal profits,
prosecutors said.
Mr. Stewart, 35 years old, testified during the trial and
claimed he didn't intend to give tips to his father, who he said
betrayed him and traded on information gleaned from casual
conversations about Mr. Stewart's work.
A jury in Manhattan federal court convicted Mr. Stewart on nine
counts of securities fraud and other charges after six days of
deliberations.
His father previously had pleaded guilty, is cooperating with
the government and was sentenced to four years of probation.
Two other cooperating witnesses who testified during the trial
said they had received stock tips from the elder Mr. Stewart and
used them to purchase stock options. One of the men, Mr. Cunniffe,
recorded conversations between himself and Robert Stewart. During
one of the recorded meetings played during the trial, Mr. Stewart
said his son once chastised him for failing to trade on a tip,
saying, "I can't believe I handed you this on a silver platter and
you didn't invest in it."
Mr. Cunniffe also has pleaded guilty and is seeking a
less-stringent sentence in exchange for his cooperation.
Perella Weinberg previously called Mr. Stewart's behavior rogue
and said the "charges against an employee of the firm alleging
insider trading activity are unprecedented in our history." A
representative at J.P. Morgan declined to comment.
The verdict is a victory for the Manhattan U.S. Attorney's
office after a 2014 appeals court insider trading ruling made it
more difficult for prosecutors to prove insider-trading cases.
The 2014 appeals-court decision said prosecutors had been too
aggressive in their interpretation of insider-trading law and that
they must prove traders knew that the person who provided an inside
tip gained some sort of reward for doing so. The court also said
the reward had to be tangible, and more than just career advice or
friendship, as prosecutors had alleged in previous cases. Some
observers predicted the ruling would slow insider-trading
prosecutions.
In Mr. Stewart's case, prosecutors said there was a benefit
between father and son, alleging Mr. Stewart had profited from his
father's trades because his father paid more than $10,000 for his
wedding photographer.
Mr. Stewart's sentence will be determined by U.S. District Judge
Laura Swain, who presided over the trial. He could face years in
prison.
Write to Christopher M. Matthews at
christopher.matthews@wsj.com
(END) Dow Jones Newswires
August 17, 2016 16:32 ET (20:32 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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