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The ‘Silver Platter’ Insider-Trading Case Is Back

The ‘Silver Platter’ Insider-Trading Case Is Back

(Bloomberg) -- It was an insider-trading case on a silver platter.

At least, that’s how it looked to the prosecutors. The FBI had an undercover recording of the father of Perella Weinberg Partners LP’s former managing director Sean Stewart saying his son chastised him for missing a chance to trade on inside information.

“I handed you this on a silver platter, and you didn’t invest,” Bob Stewart said his son told him, according to the tape.

The recording was a centerpiece of Sean Stewart’s 2016 trial, helping a jury convict him and resulting in a three-year prison sentence -- until an appeals court overturned the conviction. Prosecutors took their second stab at convicting Stewart on Monday, this time without the “silver platter” at their disposal.

U.S. District Judge Jed Rakoff last week barred them from using the crucial evidence, calling the hourlong recording “a rambling series of disjointed statements.”

The ‘Silver Platter’ Insider-Trading Case Is Back

Stewart’s lawyer Steven Witzel argued in opening statements Monday that there’s no evidence Stewart knew his father would trade on the information. Witzel portrayed his client as an investment banker on the rise, with no reason to get involved in a insider-trading scheme, let alone one in which he got no money in return. The conversations between him and his father were routine, and while Stewart made “a big mistake” discussing work and certain companies by name, it wasn’t a crime, Witzel told the court.

If anything, Bob “betrayed” his son to turn a profit as financial woes began to mount, he told the jury.

“Robert endangered Sean and destroyed his career,” Witzel argued. “The government has a mountain of evidence against three inside traders and nothing against Sean.”

Defense lawyers typically have an advantage in retrials, and they undeniably have the upper hand here, according to legal experts. Without the evidence that prosecutors hung their arguments on three years ago, the defense attorneys are now poised to attack even harder, said St. John’s University law professor Anthony Sabino.

“If that’s the best they could’ve thrown at Sean Stewart, now the defense has an opportunity,” Sabino said. “That’s a point of vulnerability.”

The Stewart prosecution is a polarizing case of Wall Street secrets tangling with family dynamics. Stewart is accused of leaking confidential information on five health-care mergers to his father, who traded on the tips he received from 2011 to 2014, making a $150,000 profit. Bob got probation after he pleaded guilty.

In court on Monday, prosecutors focused on Stewart’s alleged repeated policy violations and willful neglect. Even after his former employer JPMorgan Chase Inc.’s compliance officers brought his father’s early trades to his attention, Stewart lied to throw regulators off the trail while he continued passing merger information to Bob, according to the government. Despite coming out of the scheme emptyhanded, Stewart provided the tips as a way to “help his father without reaching into his own pocket,” prosecutors said.

Stewart testified in his own defense at the first trial, claiming his father betrayed him by trading on information he had picked up during informal family chats. His lawyers sought to have Bob testify at the trial but failed to do so after the government refused to give Bob 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 conviction.

Read More: Mom’s Plea Fails to Sway Judge as Sean Stewart Gets 3 Years

His father’s testimony could have cleared Stewart, or at the very least contradicted prosecutors’ arguments, according to an appeals brief filed by Stewart’s lawyers. The absence of it was all part of prosecutors’ effort to limit rebuttals as they relied on “dubious hearsay,” according to the brief.

The “silver platter” evidence was a crippling blow to the defense. One smoking gun led to another when prosecutors argued that Stewart benefited from passing the tips, claiming his father used $10,055 to pay for a photographer at his son’s wedding in 2011. Stewart’s lawyers argued that’s just what dads do for their sons, and presented evidence to show Bob paid similar expenses for Stewart’s younger brother Ryan when he got married.

The question of what Stewart got out of the deal initially divided jurors contemplating the case. After five days of deliberations, they agreed he benefited, and that was enough to convict him.

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

--With assistance from Bob Van Voris.

To contact the reporter on this story: Gerald Porter Jr. in New York at gporter30@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Peter Jeffrey, Joe Schneider

©2019 Bloomberg L.P.