Sean Stewart told jurors he lied to JPMorgan Chase & Co. compliance lawyers in 2011 to protect his father and avoid a black mark on his own professional reputation.
Stewart, 35, is charged with passing tips on five health-care mergers to his father, Bob Stewart, from 2011 to 2014. He testified Monday in his insider-trading trial that he lied when he told lawyers that he hadn’t given his father any information about Kendle International Inc. Instead, Stewart testified, he often talked about work with his father and other family members, never thinking the information would be used to make trades.
“I did not want to get in trouble,” he said on cross-examination by Assistant U.S. Attorney Brooke Cucinella. “I did not want my father to get in trouble.”
“You lied to the people that were sitting right across from you, right?” Cucinella asked.
“I did,” Stewart said.
He testified that he was questioned by the 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 by INC Research LLC was announced. At an August 2011 meeting at the Yale Club in Manhattan, Sean said, he confronted his father about the trades.
Risky Move
Stewart was questioned in Manhattan federal court for an hour and a half Monday, his second day on the witness stand. He testified in a risky move to convince jurors that he was unaware his father was using information gleaned from discussions about work, the family and other matters.
“My dad made some terrible mistakes,” Sean Stewart testified. “He used me.”
Sean Stewart left JPMorgan Chase for Perella Weinberg Partners LP in October 2011, where he continued providing tips to his father, according to prosecutors. Sean testified that the elder Stewart had promised never again to trade on information his son acquired at work.
Claudia Stewart, Sean’s mother and the wife of Bob Stewart for 39 years, told jurors that she, Sean’s brother Ryan and their wives were almost always present when Sean and Bob Stewart were together. She said she never noticed them speaking privately.
“I would say, ‘What’s going on, what’s the issue?’” if she had seen them talking one-on-one, she said. “I’d probably think they were talking about me, because that’s how I am.”
Before the trial began, Sean’s lawyers tried to force Bob Stewart to testify as a defense witness. At a hearing, Bob pleaded his Fifth Amendment right against incriminating himself. U.S. District Judge Laura Taylor Swain agreed with Bob’s lawyers that he couldn’t be forced to take the witness stand.
Father’s Gain
Prosecutors said that Sean Stewart benefited from his father’s insider trades when Bob Stewart used $10,055 to pay for the photographer at his son’s June 2011 wedding. Claudia Stewart testified that the couple also paid a $7,200 photographer’s bill for the wedding of Sean’s brother the following month.
Claudia has sat in the front row of the courtroom, behind her son at the defense table, for every day of the trial, which began with opening statements July 27. She and Sean both became tearful when his lawyer, Martin Cohen, showed jurors photos of what she called “happy family times,” including Sean with Bob in the pool, on the Little League team coached by Bob, and at a party for Ryan’s high school graduation.
The relationship with his father is “damaged, perhaps permanently damaged,” Sean said at the conclusion of questioning by his attorney.
“He is my father, and he raised me,” Sean said. “And I love him, and I always will.”
Both sides delivered closing arguments after Sean and Claudia Stewart’s testimony.
"Five times, the defendant handed his father tomorrow’s news today, so he could make some fast cash on stolen information," Assistant U.S. Attorney Sarah Eddy McCallum told jurors.
‘Foolish Man’
McCallum told jurors that if Sean Stewart, a Yale University graduate and successful investment banker, told the truth about not knowing his father was trading on the details of the deals they discussed, he would have to be "a naïve, foolish man."
McCallum called the idea "ridiculous," telling jurors Sean is instead "remarkably polished."
Martin Cohen, a lawyer for Stewart, told jurors that his client was victimized by his father.
"How could a father do what Robert Stewart did here to Sean Stewart?" he asked. "He never intended his father would take that information and trade on it."
Cohen said the father merely picked up company names from conversations with Sean, knowing that his son specialized in healthcare mergers. Cohen said the government’s star witness, Bob’s friend and trading partner, Richard Cunniffe, lied when he implicated Sean Stewart in the insider-trading conspiracy.
Swain said jurors will begin deliberating tomorrow after she instructs them on the law that applies to the case.
The case is U.S. v. Stewart, 15-cr-00287, U.S. District Court, Southern District of New York (Manhattan).
