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Ex-Wall Street banker's insider trading conviction overturned

Reuters  |  NEW YORK 

By Jonathan Stempel

NEW YORK (Reuters) - A divided federal appeals court on Monday overturned the conviction of a former Wall Street investment accused of passing tips about five mergers in the to his father, and ordered a new trial.

In a 2-1 decision, the 2nd said Sean Stewart, who worked at and Perella Weinberg Partners, should have been allowed to challenge a crucial piece of evidence, a recorded conversation between his father and a friend who was cooperating with prosecutors.

The Manhattan-based appeals court had in June released Stewart, 37, from prison after just one year of his three-year sentence, signaling he would likely to win a reversal, new trial or lesser sentence. It had heard his appeal in February.

A spokeswoman for U.S. Attorney in declined to comment.

Alexandra Shapiro, a lawyer for Stewart, was pleased the conviction was overturned, calling the excluded evidence "critical to Mr. Stewart's defense."

Stewart was convicted in August 2016 on nine fraud and conspiracy counts for passing tips to his father Robert from 2011 to 2015.

Prosecutors said this led to $1.16 million of profit for and his friend Richard Cunniffe, to whom he had forwarded some tips.

In the recorded conversation, recounted to Cunniffe how his son had complained about his failure to take advantage of some inside by saying: "I handed you this on a silver platter and you didn't invest in this."

sought to introduce statements his father later made to the FBI suggesting he did not intend to commit insider trading, or had been drinking when he made the "silver platter" comment.

The trial judge, Laura Taylor Swain, rejected this request, because never specifically said his son had not made the "silver platter" statement.

But in an unsigned decision, the appeals court said this was an error that was not harmless.

It cited the importance to the government's case of the statement, which prosecutors repeatedly called "devastating," and the jury's five-day struggle to reach a verdict.

"Robert's FBI interview offered fundamentally distinct recollections of the silver platter exchange that cast a different light on Sean's intentions" and could have "tempered the statement's 'devastating' effect," the majority said.

U.S. Richard Berman, sitting by designation, dissented. He called evidence of Sean Stewart's guilt "overwhelming" even without the silver platter statement.

Robert Stewart pleaded guilty to a related conspiracy charge, and Cunniffe to fraud and conspiracy charges. Both were sentenced to probation.

The case is U.S. v. Stewart, 2nd U.S. Circuit Court of Appeals, No. 17-593.

(Reporting by in New York; Editing by Tom Brown)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, November 05 2018. 22:18 IST