In “Under the Bus” and “Never Trust the People You Cheat With” Category

When you are caught on a wiretap cursing, stewing, and fretting about being caught for insider trading, there are not many routes for your defense attorney to take.  Suppress the wiretapped conversations that indicate intent?  With that evidentiary fight lost, Danielle Chiesi, a fund manager, became the 17^th person to enter a guilty plea in an insider trading ring that has resulted in criminal charges against charged 40 Wall Streeters and company executives.  Ms. Chiesi admitted that she acted as a conduit of confidential information from corporate insiders to hedge fund owner, Raj Rajaratnam and others. She, of course, made a little for herself  along the way.  The criminal charges put the amount at $1.7 million in illegal gains.

It was not as if Ms. Chiesi did not see it coming.  One conversation with an AMD executive included the following, “I swear to you in front of God. You put me in jail if you talk . . . I’m dead if this leaks.  I really am . . . and my career is over.”[1]  Her more salty language also emerged as she explained that she would be “like Martha ______ Stewart” if she was caught passing the information.[2]

The ring of epicenter Chiesi is nothing short of remarkable.  Oh, what a tangled web. A quick summary of who did what and where the pleas are helps us to understand why Ms. Chiesi felt betrayed by her friends, intimate and otherwise.  Here’s how it all played out:

Danielle worked as a portfolio manager at New Castle, CEO Mark Kurland, who was her former boss at Bear Stearns. Mr. Kurland and Ms. Chiesi had an affair.

Mr. Kurland entered a guilty plea and is serving a 27-month sentence.

Danielle had an affair with Robert Moffat, a former senior vice president at IBM/Sun Microsystems, who passed information along to her. 

Mr. Moffat entered a guilty plea and admitted he had an intimate relationship with Ms. Chiesi.  He is serving a 6-month sentence.

Danielle passed information along to Steven Fortuna at S2 Capital. 

Mr. Fortuna is a cooperating witness.

Danielle passed information along to Richard C.B. Lee, a hedge fund manager, and Ali Far, a partner, at Spherix Capital. 

Both are cooperating witnesses.

Of the six folks who were arrested on the day of the Raj and Danielle arrests, only Raj has not entered a guilty plea. 

Mr. Rajaratnam will stand trial.  He also lost the evidentiary battle.  So, the hedge fund owner stands alone.  He goes to trial in one month, can’t swing a deal with prosecutors at this late date, and will get to see a goodly number of the 25 who benefited from the passed-along information help the prosecution in exchange for lesser sentences that are now beyond his reach. 

You never trust the people you cheat with; they will throw you under the bus, even when there was a romantic relationship.

Ms. Chiesi’s demeanor and language have changed dramatically.  In court, she offered the following to the federal judge, “ This guilty plea causes me great pain, and I am deeply ashamed by what I did.  I ruined a 20-year career that I truly loved and have brought disrepute to an entire profession.”[3]  She also apologized to her sister and nieces who were in court with her. And so the Martha Stewart prediction came to pass.  Except that this plea is for insider trading, not obstruction of justce. 

 

[2] Susan Pulliam and Chad Bray, “Key Plotter Pleads Guilty in Galleon,” Wall Street Journal, January 20, 2011, p. A1. At p. A2.

[3] Lattman at p. B6.