Stewart Says Wedding Plans May Have Tipped Dad to MergerBy
Investment banker testifies in risky bid to clear his name
Stewart is charged with passing merger tips to his father
Never imagining his dad would trade on the information, former Perella Weinberg Partners LP investment banker Sean Stewart told his father about his work on a pending merger -- but only because he was so busy he thought he might have to postpone his wedding.
Stewart made the claim Thursday, testifying in a high-stakes bid to convince a Manhattan jury he didn’t pass illegal tips on five health-care mergers to his accountant dad, Bob Stewart. Whether the jurors believe him may decide his fate in a trial over his alleged misuse of inside information he learned at JPMorgan Chase & Co. and Perella Weinberg.
Stewart, a JPMorgan vice president at the time, told jurors that work on Kendle International Inc.’s 2011 acquisition by INC Research LLC presented “a unique opportunity” with increased responsibility and contact with the client, but that it was contributing to family stress over the wedding arrangements.
His testimony followed the government’s presentation of witnesses, including Richard Cunniffe, a former friend of the elder Stewart, who testified the two men traded on the tips to make about $1 million, most of which went to Cunniffe.
The younger Stewart testified that his work on the Kendle deal made him consider delaying his wedding to Elizabeth Johnson, a Manhattan lawyer. He said he discussed the assignment and the possible timing with his fiance and his parents, never thinking they would use the information or discuss it with anyone else.
“Our whole family is very close and we talk about everything,” he said.
Sean says his father betrayed him by secretly using the information to make money. The son faces as long as 20 years in prison on the most serious charges against him.
“Why are you testifying today?” Martin Cohen, Sean’s lawyer, asked.
“Because I’m innocent,” Stewart, 35, answered. “I never gave my father information so that he could trade on it.”
Cohen introduced e-mails from 2011 showing the Stewart family and Johnson coping with a health emergency involving Sean’s mother, Claudia Stewart; squabbling over personal matters; and preparing for the wedding of Sean’s brother, Ryan Stewart. E-mails from 2012 showed Bob and Claudia offering support to Sean as he and Johnson had a baby and then as their marriage fell apart. Sean Stewart choked up on the stand as he read one e-mail from his parents suggesting the couple pursue marriage counseling.
The defense is trying to show that phone calls and e-mails between Sean Stewart and his father had nothing to do with passing inside information.
Stewart testified that he was questioned by the JPMorgan Chase compliance staff after his father’s name showed up on a Financial Industry Regulatory Authority list of people who traded in Kendle stock around the time the acquisition was announced. He met his dad at the Yale Club in Manhattan to discuss the matter, he said.
“I was confused, ashamed, taken aback, wanted to know why he would do something so foolish, so stupid,” Stewart said. “I told him to never do that again and he promised he would not.”
Stewart said he lied to JPMorgan Chase by claiming he knew of no way his father could have learned of the Kendle deal. He told jurors his father was “shaken up” by the inquiry and that he believed the elder Stewart’s promises not to do it again. Sean Stewart said he continued to discuss work with his family but didn’t disclose deal details such as timing or acquisition prices.
“In hindsight what I did was incredibly foolish,” Stewart said, responding to the lawyer’s suggestion that he hadn’t been careful. He said he learned about most of his father’s trading only after his May 2015 arrest.
“I never, ever gave my dad information that he could trade on,” Stewart said.
Stewart’s decision to testify allows him to present his side to jurors but gives prosecutors the opportunity to cross-examine him in hopes of undermining his story. The government may also try to present evidence to show Stewart can’t be trusted to testify truthfully.
Stewart will be back on the witness stand when the trial resumes Monday. U.S. District Judge Laura Taylor Swain told jurors she expects they’ll begin deliberating later that day.
The case is U.S. v. Stewart, 15-cr-00287, U.S. District Court, Southern District of New York (Manhattan).