Ex-Banker Found Guilty of Insider Trading

(CN) — A former Manhattan investment banker was convicted Wednesday of inside trading when a jury found that he shared $1 million in illegal profits after tipping off his father to mergers and acquisitions.

Sean Stewart, 35, was found guilty of numerous fraud charges after a two-week trial in Manhattan Federal Court.

He was convicted of one count of conspiracy to commit securities fraud and fraud in connection with a tender offer, one count of conspiracy to commit wire fraud, six counts of securities fraud and one count of fraud in connection with a tender offer.

Stewart was charged last year, along with his father Robert Stewart. Prosecutors say the father and son duo traded on inside information about acquisitions of five health care companies from 2011 to 2014.

According to the 31-page indictment, they traded on information about INC Research's purchase of Kendle International in May 2011; Apax Partners' acquisition of Kinetic Concepts in July 2011; Hologic's purchase of Gen-Probe in April 2012; Linde AG's acquisition of Lincare Holdings in July 2012; and Becton Dickinson's acquisition of CareFusion in October 2014.

The younger Stewart began tipping his father with nonpublic information about pending mergers and acquisitions while he worked as vice president in healthcare investment banking for JPMorgan Chase, according to Manhattan U.S. Attorney Preet Bharara.

Stewart had learned that his father was having financial trouble, but decided to give him stock tips instead of loaning him money, prosecutors said.

"Another insider trading defendant stands convicted after trial by jury," Bharara said in a statement. "Time and time again, Sean Stewart took his clients' most sensitive corporate secrets and fed them to his father on a silver platter for quick and illegal profits. Insider trading rigs the securities markets in favor of cheaters, and we will continue to investigate and prosecute this crime aggressively."

Stewart's conviction is the first inside-trading conviction since the Second Circuit loosened such laws in 2014. The appeals court ruled that the government "must prove beyond a reasonable doubt that the tippee knew that an insider disclosed confidential information and that he did so in exchange for a personal benefit." (Emphasis in original).

The charges of securities fraud, tender offer fraud, and wire fraud conspiracy each carry a maximum of 20 years in prison.

The elder Stewart pleaded guilty in August 2015 to one count of conspiracy to commit securities fraud and fraud in connection with a tender offer. He was sentenced to four years' probation and forfeited $150,000.

His son is scheduled to be sentenced Feb. 17.

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