Tuesday, October 3, 2023 | Back issues
Courthouse News Service Courthouse News Service

Court Orders Retrial in Father-Son Inside-Trading Case

A man convicted of passing along stock tips to his father won a 2-1 reversal Monday from the Second Circuit.

MANHATTAN (CN) - A man convicted of passing along stock tips to his father won a 2-1 reversal Monday from the Second Circuit.

Back in February 2017, Sean Stewart was convicted of giving his father, Robert Stewart, tips on medical-device companies, based on information he had from performing acquisitions work for JPMorgan Chase.

While facing securities fraud charges, Stewart admitted that he had an unusually close relationship with his father, which included openly talking about his work. His father then used that information to buy and sell stocks himself, or through two other charged individuals.

The father faced allegations of insider trading as well, however, and claimed that his son encouraged him to take advantage of his insider knowledge.

He quoted his son as having said: “I can’t believe it. I handed you this on a silver platter, and you didn’t invest.”

But Robert Stewart remembered the exchange differently after he was arrested, telling the FBI that his son mentioned that Robert could have made money “if” he had invested, and that Sean had been drinking when he said it.

Sean Stewart had moved to include that FBI interview as evidence when he was on trial in the Southern District of New York. Though he hoped it would undercut the “silver platter” quote, his trial judge found that the FBI interview would not have any meaningful effect on the jury’s decision.

After he was convicted on all counts, Sean appealed on the basis that he was improperly precluded from impeaching the “silver platter” comment

The Second Circuit vacated Sean’s conviction this morning, emphasizing that the charges that he faced specifically pertained to intent, even though there was strong evidence of illegal collusion between father and son.

“Seanʹs intent was the central point of contention between the parties,” Chief U.S. Circuit Judge Robert Katzmann wrote for the majority today. “On that issue, the governmentʹs evidence was at its weakest.”

The ruling notes that Robert Steward pleaded guilty to one count of conspiracy to commit securities fraud based upon inside information.

U.S. District Judge Richard Berman, who sat on the panel in Manhattan by designation from New York’s Southern District, said he would have upheld Sean Stewart’s conviction.

“The point is that even without the silver platter statement, the government would have presented powerful evidence of Sean’s intent to commit insider trading and benefit his father,” Berman wrote. “The silver platter statement made the government’s case even stronger, i.e., adding incrementally to the overwhelming evidence of Sean’s guilt. The evidence renders harmless any error by the district court in excluding the post arrest statements.”

Categories / Appeals, Criminal, Securities

Read the Top 8

Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.