Son's Tips to Dad Lead to Conviction -- WSJ
August 18 2016 - 3:02AM
Dow Jones News
By Christopher M. Matthews
A former managing director at Perella Weinberg Partners LP was
convicted of insider trading for tipping his father to pending
health-care deals, resulting in more than $1 million in illegal
profits.
A jury in Manhattan federal court on Wednesday found Sean
Stewart guilty on nine counts of securities fraud and other charges
after six days of deliberations. The verdict is a victory for the
Manhattan U.S. attorney's office after a 2014 appeals-court ruling
made it more difficult for prosecutors to prove insider-trading
cases.
Prosecutors alleged that Mr. Stewart began tipping his father as
early as 2011, when he was a 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
investment bank Perella in October 2011. They said he thought his
father was in financial trouble and provided the tips to help
him.
Prosecutors said his father, Robert Stewart, and another
involved in the scheme, Richard Cunniffe, made more than $1 million
in illegal profits.
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. 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 has pleaded guilty and is seeking a less-stringent
sentence in exchange for his cooperation. The younger Mr. Stewart
could face up to 20 years in prison, but in similar cases the
sentence is typically much shorter.
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 for J.P. Morgan declined to comment.
The 2014 appeals-court decision said prosecutors had been too
aggressive in their interpretation of insider-trading law. Judges
said 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 said the ruling would slow insider-trading
prosecutions.
Last year, Manhattan U.S. Attorney Preet Bharara asked a judge
to dismiss insider-trading charges against former SAC Capital
Advisors LP portfolio manager Michael Steinberg and six analysts,
who had previously been convicted of insider trading. The judge
granted the request.
In Mr. Stewart's case, prosecutors said there was a benefit
between father and son, alleging Mr. Stewart had profited from the
father's trades because his father paid more than $10,000 for his
wedding photographer.
Write to Christopher M. Matthews at
christopher.matthews@wsj.com
Corrections & Amplifications: Robert Stewart and Richard
Cunniffe made more than $1 million in illegal profits in an
insider-trading scheme, prosecutors said. An earlier version of
this article incorrectly stated that prosecutors said Mr. Stewart
made more than $1 million in illegal profits. (Aug. 17, 2016)
(END) Dow Jones Newswires
August 18, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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