Ex-Perella Banker Convicted in Insider Case -- in 65 Minutes

(Bloomberg) -- Former Perella Weinberg Partners LP managing director Sean Stewart was convicted of insider trading, the second time a federal jury has found the banker guilty and a win for prosecutors after losing their smoking gun.

The case was as much family tragedy as courtroom drama. Stewart was accused of leaking information on five health-care mergers to his father. While he never got any of the profit, his father and two associates raked in $1.1 million from trading on the tips they received from 2011 to 2014, prosecutors said. Stewart’s father got probation after pleading guilty.

Jurors in Manhattan deliberated for just 20 minutes last week and 45 minutes on Monday before returning their verdict. Stewart, 38, frowned when he heard the forewoman declare the first “guilty” of nine. His lawyer Steven Witzel shook his head after each one.

One juror, who declined to give his name, said they gave Stewart a “fair chance.” The “most damning” piece of evidence, he said, was the result of an inquiry by the Financial Industry Regulatory Authority and the ensuing trades from tips that only Stewart could have provided.

“A lot of evidence pointed to him sharing the information with his father,” the juror said.

Stewart, who didn’t take the stand, was first convicted in a 2016 trial, after more than five days of jury deliberations, and sentenced to three years in prison. He served about 13 months before a federal appeals court ordered him released in June 2018, then threw out the conviction, ruling that the judge had made errors that deprived him of a fair trial.

Monday’s verdict came even after prosecutors lost a central piece of their case, which had helped produce the first conviction: an undercover recording in which Stewart’s father, Bob, told conspirator Richard Cunniffe that his son had chided him for missing a chance to trade on inside information. The judge at the retrial said jurors wouldn’t hear the remark.

Instead, prosecutors leaned on phone records and emails to show that Stewart’s knowledge of the mergers, which he gained from his work at Perella Weinberg and previously at JPMorgan Chase & Co., coincided with details his father shared with Cunniffe and another man, Mark Boccia, both of whom testified for the government. Boccia was granted immunity from prosecution, and Cunniffe allowed FBI agents to record meetings and a phone call.

Witzel had little to say after the hearing, beyond that he was “very disappointed for Sean.”

“He abused his positions over and over again to tip his father,” U.S. Attorney Geoffrey Berman said in a statement after the verdict.

In his closing argument to the jury last week, Stewart’s lawyer Lawrence Gerschwer argued that “dumb trading” showed Stewart’s innocence, pointing to expired call options. There was no chance of making bad bets if Stewart was funneling the details of the mergers to his dad, Gerschwer argued. Stewart had no reason to become a ringleader in an insider-trading scheme, let alone one that would send as much as 90% of profits to Cunniffe, he said.

Assistant U.S. Attorney Samson Enzer told the jury that for anyone to successfully trade five times in a row on health-care mergers, they needed inside information.

“Winning the lottery once takes astronomical odds,” he said. “Winning it five times -- that doesn’t happen.”

At the first trial, Stewart testified in his own defense, claiming his father had betrayed him by trading on information he’d picked up during informal family chats. His lawyers sought to have Bob testify at the trial, but the government refused to give him immunity from prosecution.

“My father wanted to testify that I had ABSOLUTELY NO idea what he was doing, and also explain other statements, but he was threatened with potential loss of his probation and potential jail time if he did,” Stewart wrote in an email to former colleagues following his first conviction.

His father’s testimony could have cleared Stewart, according to an appeals brief from Stewart’s lawyers.

Stewart is free on bail until he reappears for sentencing on Jan. 29.

The case is U.S. v. Stewart, 15-cr-287, U.S. District Court, Southern District of New York (Manhattan).

©2019 Bloomberg L.P.

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