- Judge rules Sean Stewart can’t force his father to testify
- Ex-JPMorgan Chase, Perella Weinberg banker begins trial
Short of cash and unable to maintain his image as a successful businessman, the father of former investment banker Sean Stewart betrayed his son by using information picked up in informal chats to make illegal insider trades, a defense lawyer told jurors at the start of Sean Stewart’s criminal trial.
“He was weak and foolish and desperate,” Sean Stewart’s lawyer, Mark Gombiner, told the jury of eight women and four men Wednesday in Manhattan federal court. “He betrayed the trust and love and confidence of his son.”
The government claims Sean tipped his father, Bob Stewart, to five health-care mergers while he worked at JPMorgan Chase & Co. and Perella Weinberg Partners LP. In exchange, it says, Bob paid $10,000 for a photographer at Sean’s wedding and gave his son an additional $15,000. Bob Stewart shared some of the tips with his friend Dick Cunniffe, who pleaded guilty and agreed to cooperate with the government against the Stewarts.
The case requires jurors to weigh intimate family relationships and decide whether Bob betrayed his son and ruined his promising Wall Street career or Sean is simply scapegoating his dad to avoid prison.
The trial is the first criminal insider-trading case to go before a jury in Manhattan since an appeals court in December 2014 made it harder for the government to prove guilt. Prosecutors must now show that a person who traded on a tip knew that the source of the information received a personal benefit for leaking the news, and that the benefit must be more than just friendship. Part of Stewart’s defense may be that he didn’t receive a concrete benefit in return for what he told his father.
Sean, wearing a blue pinstriped business suit and tie, was flanked by his legal team as the trial got under way. His mother, Claudia Stewart, sat behind him in the front row of the standing-room-only courtroom.
Sean’s lawyers claim statements Bob made during questioning by the FBI prove he didn’t know his father was trading on confidential information. They have asked U.S. District Judge Laura Taylor Swain, who’s overseeing the case, to force Bob to testify. Bob, who pleaded guilty and was sentenced to probation, refused citing his constitutional right not to incriminate himself.
In a separate hearing Wednesday, Bob invoked the Fifth Amendment 17 times in response to questions proposed by Sean’s lawyers and by prosecutors. Swain considered arguments from Bob’s lawyer in a closed session, then ruled against Sean’s request that she force his father to testify.
After the hearing, Sean shook hands with Bob and his lawyers and spoke briefly with his father.
Gombiner said his client never met Cunniffe, whom he called a liar and a “small-time hustler” who’s testifying to avoid prison. He said prosecutors conducted a “flawed and biased investigation,” deciding early that Sean Stewart was guilty then looking for evidence to fit their theory of the case.
The government drew a different picture.
Sean Stewart “served up tips to his father on a silver platter, expecting that his father would profit from that information,” Assistant U.S. Attorney Brooke Cucinella said in her opening statement. To avoid detection, Bob Stewart shared some of the tips with Cunniffe, who traded on the information and shared the profits with Bob, she said.
Cucinella described for jurors a March 2015 meeting between Cunniffe and Bob Stewart in a midtown Manhattan diner. Cunniffe, wired by Federal Bureau of Investigation agents to record the hour-long gathering, passed Bob an envelope with $2,500 from an illegal trade, the government said.
As the two men sipped iced coffee, according to prosecutors, Bob told Cunniffe that his son once scolded him for failing to trade on a tip that Sean had given him “on a silver platter.”
Cucinella told jurors that the betrayal in the case was committed by Sean, not Bob.
“He betrayed the trust of his employer and of the companies he represented,” she said.
Jurors heard testimony Wednesday from a JPMorgan Chase compliance official and a U.S. Securities and Exchange Commission enforcement attorney who in 2013 interviewed Bob about his trading in one of the stocks at issue in his son’s case.
Jurors will also hear from Cunniffe and listen to excerpts from his recordings. Cucinella said the prosecution will present e-mails and phone records showing conversations between father and son.
The case is U.S. v. Stewart, 15-cr-00287, U.S. District Court, Southern District of New York (Manhattan).