Mimesis Law
23 July 2019

Father Chose Not to Testify For His Son, But It’s Not That Simple

August 25, 2016 (Fault Lines) — Richard Cunniffe made nearly $1 million from insider trading information he received from one Robert Stewart, who himself had made $150K from the same tip.  Cunniffe was then charged by the U.S. Attorney’s Office in Manhattan, chose to become a rat, and wore a wire to surreptitiously record conversations with Stewart.

Stewart then pled out, chose not to rat, and got a lenient sentence of one year home confinement.  So far, it’s a run of the mill white collar prosecution: we’ve got a couple of dudes sharing tips on upcoming financial deals that are not available to the plebs, making some good money out of it, and then at least one defendant chooses to cooperate with the government to the detriment of his golfing buddy’s cohort. But from whom did Stewart get the insider tips that made him and Cunniffe some dough? From Junior, an investment banker who was also charged and asked Papa Stewart to take the stand during his trial.  From The New York Times’ DealB%k:

Sean Stewart sought to call his father as a witness at the trial to try to show that the “silver platter” statement and others indicating the son’s knowledge of the trading were not truthful but only boasts made to Mr. Cunniffe. In a statement after his arrest, Robert Stewart had claimed that his son did not know about his trading. That information could only come to light at trial if the elder Mr. Stewart testified on the stand.

Sean Stewart wanted to show that his father was not a reliable source of information. But Robert Stewart refused to help his son, instead asserting his Fifth Amendment privilege against self-incrimination to avoid testifying.

Before bringing out the torches and pitchforks going further, let’s shed some light on the heat Robert Stewart was facing.  He pled guilty to insider trading conspiracy pursuant to a plea agreement with the government that did not include a cooperation agreement, and he received a very fair sentence of one year home detention plus 3 years of supervised release.  The sentencing federal judge told him that she would have shipped him off to the BOP if it wasn’t for his wife’s “unusually serious” medical conditions that required his constant attention.

Now, if the father had chosen to testify during his son’s trial, being the subject of cross-examination by the Assistant U.S. Attorney would’ve been the least of his worries.  If his testimony was different from what he initially told investigators about the case — that his son was unaware of the insider trading — he would be exposed to a prosecution for perjury.

If the investigator was a federal one, the DOJ could also charge him with making a false statement to a federal agent.  And if his prosecutor is feeling enthusiastic, a charge for obstruction of justice might also make it inside the indictment.

Given the father’s criminal history (he pled out his case), he would qualify for a sentencing enhancement that would drive his guidelines score closer to Dante’s inferno the right side of the federal sentencing chart, prolonging his stay at the BOP.  Given his wife’s medical condition — it must be truly serious if a federal judge spared him prison because of it — there’s a good chance she would have passed by the time he got out.

How real was the prospect of the father’s indictment had he testified in favor of his son? One never knows exactly, but all his attorneys needed to tell him was the following: he would be exposed to a perjury prosecution; the DOJ plays for keeps; and the federales were doubly pissed off at him at the moment because he chose not to cooperate and then got a lenient sentence.

They would be triply pissed off at him should he take the stand and help his son walk, especially since this was one of the biggest insider trading trials following the U.S. Second Circuit Court of Appeals’ decision of U.S. v. Newman, which tossed out two high profile insider trading convictions and made it a bit harder for the government to win these types of cases.  It’s no surprise that the DOJ refused to grant the father immunity for his testimony.  Implied or not, a threat is still a threat.

As for Sean Stewart, he took the plunge and decided to take the witness stand — as has the right to do, despite anyone’s advice to the contrary— during his trial.  Unfortunately, the jury wasn’t convinced:

He testified that his father “betrayed” him by using the information. “I never ever gave my father information expecting him to trade,” he told the jury. “My dad made some terrible mistakes. He used me.”

Testifying for his own defense opened him up to the government’s cross-examination, which focused on why he did not tell the truth when first questioned by his employer about his father’s trading. A lawyer’s favorite question to pose to an opponent is, “So you were lying about that, weren’t you?” The prosecutor grilled him to raise questions about whether the jury should believe his story about lying to protect his father.

The question of whether there was a benefit proved to be a difficult issue for jurors deciding Sean Stewart’s fate. Bloomberg reported that the jury’s forewoman said they asked themselves, “What was he getting out of it?” over the six days of deliberations. In voting to convict, another juror said, “There were just too many contradictions in his story.”

Had the son’s testimony swayed the jury in favor of a two word verdict, the fact that the father did not speak for his son — even if he faced some serious incarceratory consequences — and that the son had to sully his father’s name during his testimony, makes this case a sad story that should leave a bad taste in most people’s mouths.  At the very least, it’s not likely that papa Stewart will be getting a father’s day card inside an envelope with a BOP return address next year.

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