Appeals court tosses out banker's insider trading conviction

The insider trading conviction of an investment banker was overturned Monday by a divided appeals court panel that concluded there were procedural errors at his trial.

The 2-1 ruling by the 2nd U.S. Circuit Court of Appeals means the Yale-educated Sean Stewart could face another trial on charges his father and others made over $1 million trading on secrets he shared about pending mergers and acquisitions.

Stewart, 37, of Manhattan, a former executive in mergers and acquisitions at JPMorgan Chase & Co. and Perella Weinberg Partners LP, was released from prison in June after serving a year of a three-year sentence.

The appeals court said Stewart deserves a new trial because his lawyers were not permitted by a Manhattan trial judge to adequately challenge a statement that his father, Robert Stewart, had made.

Statements his father made to the FBI after his father's arrest in the case were not allowed to be shown to jurors, something the appeals court said was a mistake that could have made a meaningful difference in jury deliberations.

The father, who earned about $150,000 illegally, pleaded guilty to a single conspiracy count and was sentenced to a year of home detention.

The 2nd Circuit noted jurors deliberated for five days after an eight-day presentation of evidence and had reported in their third day that they were deadlocked.

"This cuts strongly against the government's unsupported assertion that admission of Robert's post-arrest interview would have made no difference to the jury," the 2nd Circuit said.

A spokesman for prosecutors declined to comment Monday.

Alexandra Shapiro, a Stewart appeals lawyer, said in a statement that his defense team was pleased.

"As the Court recognized, the excluded evidence was critical to Mr. Stewart's defense," she said.

In a dissent, District Judge Richard Berman, sitting on the appeals court temporarily, said the evidence against Stewart was overwhelming and his defense feeble.