A North Merrick father-son duo teamed up in a corrupt insider-trading scheme that netted more than $1 million in profits, prosecutors argued Tuesday in Manhattan federal court as the family-affair conspiracy trial of former investment banker Sean Stewart got underway.
“The defendant stole information,” said prosecutor Brooke Cucinella, gesturing at the brawny Yale graduate during opening arguments, “and he tipped his father so he would have an edge over every other investor in the stock market — an illegal edge.”
Stewart, 35, of New York City, was accused last year of passing tips on health care mergers to his father Robert Stewart, 61, of North Merrick, where Sean grew up and became a valedictorian and a star athlete. The father and a friend, cooperating witness Richard Cunniffe, allegedly traded on the tips.
But the case isn’t a slam dunk for the government. Robert Stewart pleaded guilty last year, but didn’t agree to testify against his son. Sean Stewart’s defense is that his dad did it, exploiting informal conversations for profit without telling his son because his own finances were in disarray.
“He was weak and foolish and desperate,” defense lawyer Mark Gombiner told jurors. “He betrayed the trust and love and confidence of his son.”
Prosecutors contend that beginning in 2011 Sean Stewart, a banker with J.P. Morgan & Co. and later with Perella Weinberg Partners, passed tips on five deals to his father, who eventually had Cunniffe do trades to make the connection less obvious. Cunniffe, who never met Sean, made the bulk of the profits.
Cucinella said one key piece of evidence would be a recorded meeting in which Robert Stewart told Cunniffe that Sean Stewart had once objected to his dad’s failure 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.”
Prosecutors also say Robert Stewart used $10,000 from the profits to pay for a photographer at his son’s 2011 wedding, and lied to his employer about talking to his dad when confronted with a list indicating Robert Stewart had traded on one of his son’s deals.
“He kept right on tipping his father, over and over again,” Cucinella said.
Gombiner urged jurors to “follow the money,” arguing that Sean Stewart, making nearly $1 million a year, would never have knowingly risked his lucrative career for a scheme in which Cunniffe, a stranger, was making the biggest profit.
The defense lawyer said Sean Stewart shared work stories with his father because of their close bond, and then denied the conversations when he learned to his surprise that Robert Stewart had traded on one of the company names because he thought it was just a “mistake.”
“He didn’t tell the truth because he was scared something might happen to his father, and it might not be the best thing for his own career,” Gombiner said.
Robert Stewart, an accountant, was sentenced to home detention and probation earlier this year by U.S. District Judge Laura Taylor Swain, based on a plea that his wife suffered from serious medical problems requiring his presence as a caregiver.
His lawyers also described the “emotional toll” the case had taken on the family, saying that his relationship with his two sons “as a role model, mentor, and friend” was “irreparably damaged and . . . unlikely to ever recover.”
While the recorded “silver platter” comment incriminated Sean Stewart, defense lawyers say that in post-arrest statements Robert Stewart said his son knew nothing — but those statements can’t come into evidence unless Robert Stewart testifies.
Prosecutors don’t plan to call him. The defense wants to have him testify, but in a hearing after the jury left Wednesday, Robert Stewart said he would assert his Fifth Amendment privilege and refuse to testify.
His lawyer cited potential “adverse consequences,” but didn’t specify whether they involved other crimes, the risk of being charged with perjury if he contradicted the government theory, or other factors.
Swain, after a private discussion with Robert Stewart and the lawyer, ruled that he wouldn’t have to testify. Father and son left court separately.