Argued: February 26, 2018
Sean Stewart appeals from a judgment of conviction entered on
February 24, 2017, in the United States District Court for
the Southern District of New York (Swain, J.). In
connection with an insider trading scheme, the
defendant-appellant was found guilty after a jury trial of
conspiracy to commit securities fraud and tender offer fraud,
in violation of 18 U.S.C. § 371; conspiracy to commit
wire fraud, in violation of 18 U.S.C. § 1349; six counts
of securities fraud, in violation of 15 U.S.C. §§
78j(b) and 78f; and tender offer fraud, in violation of 15
U.S.C. §§ 78n(e) and 78ff. On appeal, the
defendant-appellant argues that he was deprived of an
opportunity to examine a key witness in light of that
witness's improper invocation of the Fifth Amendment
privilege against self-incrimination; that his due process
rights were violated by the district court's decision not
to immunize that witness in order to allow the witness to
testify without fear of self-incrimination; and that several
evidentiary errors were made. Although we disagree with the
defendant's constitutional arguments, we nevertheless
find that certain impeachment material that might have
influenced the jury's deliberations should not have been
excluded. Accordingly, the judgment of the district court is
VACATED and REMANDED.
E. Cucinella (Sarah K. Eddy, Brian Blais, and Margaret
Garnett, on the brief), Assistant United States Attorneys,
for Geoffrey S. Berman, United States Attorney for the
Southern District of New York, New York, NY.
Alexandra A.E. Shapiro, (Sean Nuttall, on the brief), Shapiro
Arato LLP, New York, NY, for Sean Stewart.
Before: Katzmann, Chief Judge, Leval, Circuit Judge, and
Berman, District Judge. [*]
an unusual insider trading case, in that defendant-appellant
Sean Stewart does not contest that he provided material,
nonpublic information to his father, Robert Stewart. Rather,
Sean readily acknowledges that "he was very close to his
father, routinely confided in him, and even occasionally
mentioned potential deals," and that his father and
others then invested based upon that information. Def. Br. 1.
The key question facing the jury was whether to believe Sean
when he denied that he knew that his father would trade on
the information that Sean had provided. Evidently they did
not, as Sean was convicted on all counts brought against him.
government's case largely hinged on the so-called
"silver platter statement," in which Sean
purportedly told Robert that he expected Robert to invest
based upon information to which Sean had access through his
work as an investment banker. In this matter, a silver
platter proved to be the government's silver bullet.
Because we agree that Sean should not have been precluded
from impeaching the silver platter statement, however, we
VACATE the conviction and
REMAND this matter to the district court for
Stewart testified that he was "very close" to his
parents growing up and that he had an "excellent"
relationship with his father, Robert Stewart, in particular.
Tr. 1129-30. Into adulthood, Sean would regularly speak with
his parents several times per week by phone and would see
them in person once or twice per month. Among the topics that
they often discussed were Sean's career and what he was
working on. Although Sean knew that company policy forbade
him from discussing confidential information with anyone
other than his colleagues, he did not abide by that rule.
Rather, he admitted that he "spoke very freely"
with his family, explaining that he "grew up in a
household where there were no secrets, and [his family]
shared everything about [their] lives." Id. at
began working as an analyst at JP Morgan Chase in 2003. Among
the matters that Sean worked on while at JP Morgan was the
sale of a pharmaceutical research company, Kendle
International, Inc. Robert began purchasing Kendle common
stock on February 7, 2011, shortly after Sean had attended a
kick-off meeting for the Kendle project. In addition, Robert
asked a colleague, Mark Boccia, to make further investments
in Kendle on Robert's behalf. Boccia began doing so in
mid-February, with some of the investments made on his own
behalf and some on behalf of Robert. Kendle's acquisition
was publicly announced on May 4, 2011. The following day,
Robert sold his Kendle securities, and, acting on
Robert's advice, Boccia did the same. Boccia then paid
Robert a share of his trading profits in cash.
around the same time, JP Morgan was also involved in the sale
of Kinetic Concepts, Inc., a medical device company known as
"KCI." Although Sean did not work on the KCI
transaction directly, he was involved with ensuring that it
was properly staffed. Boccia began purchasing KCI call
options on behalf of both himself and Robert on April 5,
2011, with Robert this time telling Boccia that Sean
"knew that [KCI was] going to merge." Id.
at 371. Robert also asked another colleague, Richard
Cunniffe, to purchase KCI call options on his behalf,
explaining that he could not do so directly because "he
was too close to the source." Id. at 623.
Cunniffe began purchasing KCI call options on April 21, 2011.
In addition, Robert began personally purchasing KCI common
stock on May 5, 2011, the same day on which he had sold his
Kendle shares. The KCI transaction was publicly announced on
July 13, 2011, generating significant profits for Cunniffe
and Robert, though Boccia's options had already expired
by that time.
on May 25, 2011, Sean was made aware that the Financial
Industry Regulatory Authority ("FINRA") was
investigating suspicious trading in Kendle securities. In
connection with that investigation, Sean was asked whether he
knew any of the individuals whose names appeared on a list
circulated by FINRA. Although Robert appeared on the list,
Sean initially denied recognizing any of the listed names. JP
Morgan requested that Sean review the list again after FINRA
inquired further, at which time Sean acknowledged that the
list included his father's name. JP Morgan's legal
and compliance staff subsequently arranged to meet with Sean
on August 26, 2011.
night before that meeting, Sean and Robert met at the Yale
Club. According to Sean, he told Robert about the upcoming
meeting and said that Robert's name had appeared on
FINRA's list. Sean testified that he confronted his
father about the Kendle trades because he was "confused,
ashamed, [and] taken aback," and he "wanted to know
why [Robert] would do something so foolish, so stupid,"
as Sean knew Robert might have learned of the Kendle
transaction from their conversations. Id. at 1235.
Sean described Robert as "embarrassed" and
"nervous" upon being asked about Kendle, claiming
to have invested based upon public information, though Sean
did not believe him. Id.
following day, Sean told JP Morgan compliance and legal
personnel that he had not discussed Kendle with his father.
Sean has admitted that he "lied," explaining that
he "was nervous about [Robert] getting in trouble"
and recognized that his father's investments "would
be potentially damaging for [his] prospects"
professionally. Id. at 1236. Sean claimed that a few
days after his meeting at JP Morgan, he told Robert "to
never do that again, and [Robert] promised that he would
not." Id. at 1237. Sean believed Robert, who
Sean described as having been "pretty shaken up" by
the experience. Id. at 1251.
neither FINRA nor JP Morgan took any disciplinary measures
against Sean, FINRA nevertheless referred the matter to the
Securities and Exchange Commission, which conducted its own
investigation. The SEC spoke with Robert, who acknowledged
that Sean worked at JP Morgan but denied having discussed
Kendle with Sean either before or after he had purchased the
company's stock. The SEC subsequently closed its
investigation without taking any enforcement action.
left JP Morgan for Perella Weinberg Partners, a boutique
investment bank, in September 2011. While at Perella
Weinberg, Sean worked on the acquisitions of Gen-Probe, Inc.,
and CareFusion, both medical device companies, and learned of
the planned acquisition of Lincare Holdings, Inc., a home
healthcare company. Cunniffe purchased the securities of each
of these companies in advance of the acquisitions, doing so
at the suggestion of Robert in each instance, and sold the
securities after each acquisition was publicly announced.
Each time, Cunniffe shared the investment proceeds with
profits from these five investments totaled $1.15 million. In
approximate terms, Cunniffe received $1 million; Robert
received $150, 000; and Boccia lost money as a result of the
expiration of his KCI call options. There is no evidence that
Sean directly profited from the investments.
to Robert, the Federal Bureau of Investigation approached
Cunniffe sometime in the spring of 2015, after all of the
investments at issue. Cunniffe decided to cooperate with the
FBI, and subsequently recorded several conversations with
Robert. Most relevant to this litigation is a conversation
between Robert and Cunniffe that occurred on March 24, 2015,
during which they had the following exchange regarding
Robert's Kendle investments:
Robert: And then like about a year later I
get a call from the SEC questioning me on that transaction.
[Indiscernible] 5, 000 dollar transaction. What are they
gonna do? And then nothing happened. I don't know what
they're doing now. I figure it's a 3 year statute, 4
year, 5 year whatever it it's way way over that. But it
pretty much put a fear in me that a [indiscernible].
Cunniffe: Would scare the shit out of me
[indiscernible] that's for sure.
Robert: Yeah. I mean I still, I still
remember being [indiscernible] years ago. Sean would always
say, ah I can't believe you [indiscernible]. Said I
can't believe it. I handed you this on a silver platter
and you didn't invest in this, and you know. I said,
Sean, did you ever get a call from the SEC, like I'm
gonna actually do this [indiscernible], and he says
[indiscernible]. I mean [Laughter]. Yeah, that is something.
Supp. App. 143-44 (alterations in original, emphasis added).
The district court referred to the italicized portion of this
conversation as the "silver platter statement,"
nomenclature which we hereby adopt.
was arrested and interviewed by the FBI shortly thereafter.
During the attendant questioning, Robert claimed that Sean
only learned of the Kendle trades "after the fact,"
at which point Sean became "[s]urprised and
ang[ry]," prompting Robert to acknowledge that "it
was stupid" for him to have invested. S.D.N.Y. Dkt. No.
120-2 at 11, 16. When asked why Sean told Robert about other
deals that he was working on following the Kendle episode,
Robert speculated that Sean "figured I probably
wouldn't do it again-you know-in his eyes,
y'know-I'm his father-I'm-y'know-on a
pedestal." Id. at 16. Robert repeatedly denied
that Sean was aware of any of the other investments or that
Sean had intended that Robert would trade on any of the
information that Sean had provided.
asked Robert twice about the silver platter statement. The
following colloquy occurred near the start of the interview:
FBI: [H]ow do you explain a comment you made
to Rick [Cunniffe], that Sean got angry with you when he gave
you this information on a silver platter and you didn't
Robert: I think I was just saying to Rick
because Sean said, "Uh y'know, all these deals-if
you were trading-you could have made like millions of
dollars[, ]" and I said, "Sean nobody's going
to trade and make millions of dollars on this stuff."
That wasn't his intention.
FBI: So why was Sean giving you this
Robert: I think he was just proud of the
fact that he was doing deals and y'know, almost like
["]hey, this deal is going to go way up[, "] not
intending that somebody was going to trade on it.
Id. at 1-2. Subsequently, the interview returned to
the same topic:
FBI: So why did he get mad at you? Why did
he get mad at you and say, "I served this up to you on a
silver platter and you didn't invest in it." Why did
he get mad at you about that?
Robert: Um, I think that-that day, he was
FBI: You remember that day specifically?
Robert: I remember-y'know-during that
period, because he was getting divorced,
he's-y'know-and um, he just said[, ] I think he
might've said, "Y'know, Uh, y'know, I said I
was working on this deal-gee, if you had invested, you
would've made millions of dolars." And I said,
"Sean, y'know, people[, ] y'know[.]"
FBI: Get arrested for that?
Robert: "Get arrested for making
millions and millions of dollars on confidential
Robert: And that was the end of the
Id. at 11.
operative indictment was filed in the Southern District of
New York on July 15, 2015, charging both Sean and Robert with
conspiracy to commit securities fraud and tender offer fraud,
conspiracy to commit wire fraud, tender offer fraud, and six
counts of securities fraud. Robert pleaded guilty to a single
conspiracy count on August 12, 2015, while Sean proceeded to
trial. The parties engaged in extensive motion practice
before that trial commenced. The following recitation
reflects only those motions and rulings as are relevant to
Sean moved to preclude introduction of the silver platter
statement as hearsay. The district court denied that motion,
reasoning that Robert's relaying of the statement to
Cunniffe was against Robert's penal interest.
failed to exclude the silver platter statement, Sean
subsequently moved for leave to introduce Robert's
post-arrest statements to the FBI in order to impeach the
credibility of the silver platter statement. That, too, was
denied, on the ground that Robert did not specifically state
that the silver platter statement had not been made.
Sean sought to compel Robert's testimony via subpoena.
Robert responded by invoking his Fifth Amendment right
against self-incrimination in response to each topic on which
either Sean or the government hoped to inquire, after which
the district court conducted an in camera proceeding
with only Robert and his counsel present to assess the
viability of Robert's claimed privilege. The district
court thereafter sustained Robert's invocation of the
last resort, Sean sought to have Robert immunized in order to
allow him to testify without the risk of self-incrimination.
The district court denied that request as well, finding an
absence of extraordinary circumstances that would merit
providing Robert with immunity for his testimony.
trial began on July 27 and concluded on August 9, 2016. The
cornerstone of his defense was his professed belief that he
could trust his father, who Sean not did intend or expect
would misappropriate his confidences for pecuniary gain. To
rebut that argument, the government relied heavily on the
silver platter statement. The jury convicted Sean on all
counts on August 17, 2016. This appeal followed.
Privilege Against Self-Incrimination
relevant part, the Fifth Amendment provides that "[n]o
person . . . shall be compelled in any criminal case to be a
witness against himself." U.S. Const. amend. V.
"The privilege afforded not only extends to answers that
would in themselves support a conviction under a . . .
criminal statute but likewise embraces those which would
furnish a link in the chain of evidence needed to prosecute
the claimant for a . . . crime." Hoffman v. United
States, 341 U.S. 479, 486 (1951). "To sustain the
privilege, it need only be evident from the implications of
the question, in the setting in which it is asked, that a
responsive answer to the question or an explanation of why it
cannot be answered might be dangerous because injurious
disclosure could result," the assessment of which
requires that the trial judge "'be governed as much
by his [or her] personal perception of the peculiarities of
the case as by the facts actually in evidence.'"
Id. at 486-87 (quoting Ex Parte Irvine, 74
F. 954, 960 (C.C.S.D. Ohio 1896) (Taft, J.)).
danger that Robert's potential testimony posed to him is
evident from the subject-matter on which the parties sought
to question him. Those topics were submitted in advance to
the district court and clearly related to both his trading
activities and the veracity of his prior statements to the
FBI and SEC. Robert expressly invoked his Fifth Amendment
privilege against self- incrimination with respect to each
such topic, after which the district court discussed these
issues further with Robert's counsel in camera.
Moreover, the government made clear that it believed Robert
had engaged in additional insider trading for which he had
not been charged and that he had also violated 18 U.S.C.
§ 1001(a) by making false statements to federal law
trial judges must engage in a "particularized inquiry as
to whether each of [a witness's] claims of privilege
could provide evidence that would tend to incriminate
him" if the danger of self-incrimination "is not
readily apparent from the implications of the questions asked
or the circumstances surrounding the inquiry," this is
not such a case. Estate of Fisher v. Comm'r of
Internal Revenue, 905 F.2d 645, 649, 651 (2d Cir. 1990).
Where the hazards of self- incrimination are readily
apparent, a witness's invocation of the privilege against
self-incrimination need not be tested by the rote recitation
of questions that have obvious answers of which the judge is
Procedural Due Process
government is under no general obligation to grant use
immunity to witnesses the defense designates as potentially
helpful to its cause but who will invoke the Fifth Amendment
if not immunized." United States v. Ebbers, 458
F.3d 110, 118 (2d Cir. 2006). Nevertheless, "under
'extraordinary circumstances,' due process may
require that the government confer use immunity on a witness
for the defendant." United States v.
Praetorius, 622 F.2d 1054, 1064 (2d Cir. 1979). A
defendant requesting such relief must make a two-pronged
First, the defendant must show that the government has used
immunity in a discriminatory way, has forced a potential
witness to invoke the Fifth Amendment through overreaching,
or has deliberately denied immunity for the purpose of
withholding exculpatory evidence and gaining tactical
advantage through such manipulation. . . . Second, the
defendant must show that the evidence to be given by an
immunized witness will be material, exculpatory and not
cumulative and is not obtainable from any other source.
Ebbers, 458 F.3d at 119 (internal quotation marks
and citations omitted). "We review the court's
factual findings about government actions and motive for
clear error, but its ultimate balancing for abuse of
discretion," although the situations in which conferring
immunity would be required are "[s]o few and
exceptional" that "we have yet to reverse a failure
to immunize." United States v. Ferguson, 676
F.3d 260, 291 (2d Cir. 2011). This case is no exception.
first argues that the district court engaged in
discriminatory tactics by conferring immunity on Boccia while
declining to immunize Robert. The district court did not
abuse its discretion in rejecting that argument. "Our
Circuit's approach to defense witness immunity . . .
recognizes the essential unfairness of permitting the
Government to manipulate its immunity power to elicit
testimony from prosecution witnesses who invoke their right
not to testify, while declining to use that power to elicit
from recalcitrant defense witnesses testimony" that
might exculpate a defendant. United States v. Dolah,
245 F.3d 98, 106 (2d Cir. 2001), abrogated on other
grounds by Crawford v. ...