Sean Stewart, a former executive with JP Morgan and Perella Weinberg Partners who is accused of insider trading based on his work on several medical device transactions, lost his bid to have criminal charges dismissed from a federal court in New York.
Federal prosecutors in May 2015 charged Stewart, his father Robert Stewart and a 3rd man with using inside information to trade and cause another to trade in the securities of 5 healthcare companies that were acquired between 2011 and 2014.
The feds alleged that Sean Stewart 1st tipped his father to the $232 million acquisition of contract research organization Kendle International Inc. by INC Research in 2011, when the younger Stewart was working as an advisor to Kendle on the deal. The elder Stewart made about $7,900 on illicit trading in Kendle stock, the prosecutors alleged. When questioned, the father said he spent the money on his son’s wedding in June 2011, according to prosecutors.
Apax Partners and a pair of Canadian pension funds agreed to acquire Kinetic Concepts Inc. that July; the elder Stewart began trading in KCI shares based on a tip from the son, but allegedly worried that he was “too close to the source” of insider info on the $6.1 billion deal. Authorities said Robert Stewart then asked Chatsworth Securities investment banker Richard Cunniffe to make the KCI trades for him. The KCI trades brought in some $108,000 for the Stewarts, according to the prosecutors.
Sean Stewart left JP Morgan in October 2011 to become a managing director at Perella Weinberg, where he allegedly learned of a trio of big medtech deals: Hologic‘s (NSDQ:HOLX) $3.7 billion buyout of Gen-Probe in 2012; the $3.8 billion acquisition of Lincare by Linde AG that same year; and 2015’s $12.2 billion union of Becton Dickinson (NYSE:BDX) and CareFusion, the prosecutors said.
Yesterday Judge Laura Taylor Swain of the U.S. District Court for Southern New York shot down Sean Stewart’s argument that a major appellate decision in 2014 limiting the ability of prosecutors to pursue insider trading had made the law so uncertain as to be unconstitutional.
“Stewart’s arguments are overblown, unfounded and unavailing,” Swain wrote.
Both Robert Stewart and Cunniffe, a cooperating witness in the case, have pleaded guilty.
Material from Reuters was used in this report.