Second Circuit Vacates Securities Fraud Conviction Against Former JPMorgan Analyst

The Second Circuit vacated a judgment against JPMorgan Chase analyst Sean Stewart who was convicted in February 2017 of insider trading for feeding tips to his father.

The judgment was vacated by majority opinion, despite the fact that he did not challenge the claim that he provided nonpublic information to his father, Robert Stewart. Sean explicitly stated that he would mention deals containing insider information to Robert, which he would then invest in, according to the ruling.

“The key question facing the jury was whether to believe Sean when he denied that he knew that his father would trade on the information that Sean had provided,” the ruling states. “Evidently they did not, as Sean was convicted on all counts brought against him.”

The case rested on Sean’s statement to his father which became known as a “silver platter statement." The district court called a portion of a conversation between Sean and Robert the “silver platter statement,” because of a comment made by Sean, which the court found was “the most suggestive evidence of Sean’s intent that Robert should trade on the tips Sean supplied.”

“I can’t believe it. I handed you this on a silver platter and you didn’t invest in this,” Sean allegedly said, prompting the court to dub it the infamously titular “silver platter statement.”

“Although Robert never expressly denied the silver platter statement, his post‐arrest recollections offer a potentially different interpretation that could, at minimum, have tempered the statement’s ‘devastating’ effect,” the ruling states.

The majority found Sean’s intent was the “central point of contention” in the case, stating that the government’s evidence was weak, save for the so-called silver platter statement. Omitted evidence existed that could have potentially further weakened the government’s intent argument, which could have softened the jury’s outlook on the silver platter statement, according to the ruling.

The government argued that exclusion of “impeachment material,” was a harmless error and would not have had an effect on the jury. The appellate court disagreed.

The appellate court ruled the omitted evidence constituted an evidentiary error and that the error was not harmless, prompting the court to vacate the conviction.

“In this matter, a silver platter proved to be the government’s silver bullet,” the 54-page ruling stated.

District Judge Richard M. Berman penned a dissenting opinion, finding the evidence against Sean was “overwhelming,” on all nine counts of insider trading.

“The government’s evidence would have been overwhelming even if the excluded evidence had been admitted,” Judge Berman wrote.“ It included Sean’s own incriminating admissions, the testimony of 20 witnesses one of whom was a cooperator, recorded conversations, and written trading records and emails reflecting illegal securities trades.”

Judge Berman pointed to Robert, his associates and the $1.1 million they pocketed based on Sean’s insider information, according to the dissenting opinion. The judge also noted that Sean knowingly violated financial confidentiality norms and that he had lied to his employer JPMorgan over the course of his involvement with the insider trading scheme.

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