A jury has Sean Stewart, the ex-managing director of Perella Weinberg Partners LP of insider trading. Stewart is accused of giving his dad confidential tips about five health-care deals.
According to prosecutors, Stewart started giving his dad insider information in 2011 while he was VP of J.P. Morgan Chase & Co.’s (JPM) healthcare investment banking group. He continued to tip his dad when he went to work for Perella. As a result of the insider information, Stewart’s dad, Robert Stewart, and Richard Cunniffe made over $1M in illegal profits. The elder Stewart has already pleaded guilty to the charges against him.
During the trial, the younger Stewart testified that his dad had betrayed him by using the information that he had shared with him during casual conversation. He testified that he lied to compliance lawyers at JPMorgan in 2011 to protect his reputation and his father. He claimed that he never thought that his dad would use the information to make trades.
Robert has already been sentenced to four years of probation for his role after pleading guilty to securities fraud. Also, he had to forfeit $150K in ill-gotten gains. The elder Stewart shared the tips he received from his son with two others, including Cunniffee, who testified that they used the tips to buy stock options. Cunniffee had earlier pleaded guilty to insider trading.
Last year, the Securities and Exchange Commission charged the Sean Stewart and Robert Stewart with civil insider trading charges. The regulator accused them of using “coded” messages to make it appear as if they were talking about golf when they were in fact, purportedly, taking about the insider trading tips.
The SEC said that Robert and a trading partner conducted the trades in the partner’s account. Robert received his share of payments in cash so there would be no paper trail. Trades were spread over different stock options series so regulators wouldn’t notice their illicit activity.
In an unrelated insider trading case, the SEC has charged broker Paul T. Rampoldi and his friend William Scott Blythe III with insider trading that causes them to make about $90K in illicit profits. The two men are accused of trading prior to two big announcements involving pharmaceutical company Ardea Biosciences. The information was provided by an Ardea employee. The SEC charged the employee, Michael J. Fefferman, and brokers Chad E. Wiegand, who is Fefferman’s brother in law, and Akis Eracleous with insider trading last year
To avoid detection, Blythe dealt with the Ardea call option contracts using a brokerage account at a brokerag firm different from where the brokers work. A parallel criminal case has been brought against Blythe and Rampoldi.
In still another civil case, The SEC has filed insider trading charges against Dr. Edward Kosinski. The cardiologist is accused of trading ahead of two news announcements made by Regado Biosciences about developments related to a clinical drug trial in which he was the principal investigator. Purportedly knowing the news was not positive, Kosinski sold his 40,000 shares of Regado stock so he wouldn’t sustained about $160K in losses when the public found out that patient enrollment in the drug trial of REG-1 would be suspended because there had been serious allergic reactions. REG-1 is supposed to regulate blood clotting for patients undergoing coronary angioplasty.
Kosinski also made over $3K when he bet Regado’s stock price would drop. He exercised the options after the company’s stock plunged 60%. He purportedly knew ahead of the public announcement that enrollment in the trial would be stopped permanently after a patient had died. The U.S. Attorney’s Office for the District of Connecticut has filed a parallel criminal case against Kosinski.
Jury finds investment banker guilty of insider trading, Chron/AP, August 17, 2016
Father Of Former Investment Bank Managing Director Pleads Guilty To Insider Trading Conspiracy, Justice.gov, August 12, 2015