Federal prosecutors accused Robert Stewart, son Sean Stewart and a 3rd man of using inside information to trade the stock of 5 healthcare companies acquired between 2011 and 2014.
Judge Laura Taylor Swain of the U.S. District Court for Southern New York last week sentenced Robert Stewart to a year of home confinement, 3 years of probation, 750 hours of community service and the forfeiture of $150,000 gained from the illicit trading.
Before being sentenced, Stewart said he was “humiliated” and accepted responsibility for his actions. Swain said she would have sentenced Stewart to prison if not for the “unusually serious” medical condition of his wife, Claudia Stewart, who required his care. The details of her condition were not discussed.
“Mr. Stewart is grateful for the opportunity to move forward with his life in a positive way,” Stewart’s lawyer, Seth Levine, told reporters outside the courtroom.
Sean Stewart has pleaded not guilty. The 3rd man, Chatsworth Securities investment banker Richard Cunniffe, whom prosecutors said kept most of the $1.16 million in profits from the insider trades, secretly pleaded guilty in March 2015 and agreed to cooperate with authorities.
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, prosecutors alleged. When questioned, the father said he spent the money on his son’s wedding in June 2011, they said.
Apax Partners and a pair of Canadian pension funds agreed to acquire Kinetic Concepts Inc. for $6.3 billion that July; the elder Stewart soon 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.
Material from Reuters was used in this report.