By Christopher M. Matthews
A former managing director at Perella Weinberg Partners LP was convicted of insider trading for tipping his father to pending health-care deals, resulting in more than $1 million in illegal profits.
A jury in Manhattan federal court on Wednesday found Sean Stewart guilty on nine counts of securities fraud and other charges after six days of deliberations. The verdict is a victory for the Manhattan U.S. attorney's office after a 2014 appeals-court ruling made it more difficult for prosecutors to prove insider-trading cases.
Prosecutors alleged that Mr. Stewart began tipping his father as early as 2011, when he was a vice president in the health-care investment-banking group at J.P. Morgan Chase & Co.
Mr. Stewart passed on information about several health-care mergers, prosecutors said, and continued doing so after he moved to investment bank Perella in October 2011. They said he thought his father was in financial trouble and provided the tips to help him.
Prosecutors said his father, Robert Stewart, and another involved in the scheme, Richard Cunniffe, made more than $1 million in illegal profits.
Mr. Stewart, 35 years old, testified during the trial and claimed he didn't intend to give tips to his father, who he said betrayed him and traded on information gleaned from casual conversations about Mr. Stewart's work. His father previously had pleaded guilty, is cooperating with the government and was sentenced to four years of probation.
Two other cooperating witnesses who testified during the trial said they had received stock tips from the elder Mr. Stewart and used them to purchase stock options. One of the men, Mr. Cunniffe, recorded conversations between himself and Robert Stewart. During one of the recorded meetings played during the trial, Mr. Stewart said his son once chastised him for failing to trade on a tip, saying, "I can't believe I handed you this on a silver platter and you didn't invest in it."
Mr. Cunniffe has pleaded guilty and is seeking a less-stringent sentence in exchange for his cooperation. The younger Mr. Stewart could face up to 20 years in prison, but in similar cases the sentence is typically much shorter.
Perella Weinberg previously called Mr. Stewart's behavior rogue and said the "charges against an employee of the firm alleging insider trading activity are unprecedented in our history." A representative for J.P. Morgan declined to comment.
The 2014 appeals-court decision said prosecutors had been too aggressive in their interpretation of insider-trading law. Judges said they must prove traders knew that the person who provided an inside tip gained some sort of reward for doing so. The court also said the reward had to be tangible, and more than just career advice or friendship, as prosecutors had alleged in previous cases. Some observers said the ruling would slow insider-trading prosecutions.
Last year, Manhattan U.S. Attorney Preet Bharara asked a judge to dismiss insider-trading charges against former SAC Capital Advisors LP portfolio manager Michael Steinberg and six analysts, who had previously been convicted of insider trading. The judge granted the request.
In Mr. Stewart's case, prosecutors said there was a benefit between father and son, alleging Mr. Stewart had profited from the father's trades because his father paid more than $10,000 for his wedding photographer.
Write to Christopher M. Matthews at email@example.com
Corrections & Amplifications: Robert Stewart and Richard Cunniffe made more than $1 million in illegal profits in an insider-trading scheme, prosecutors said. An earlier version of this article incorrectly stated that prosecutors said Mr. Stewart made more than $1 million in illegal profits. (Aug. 17, 2016)