NEW YORK – Danielle Chiesi, claiming her former boss at New Castle Funds LLC used their “toxic” sexual relationship to manipulate her into feeding him inside tips, asked a judge to sentence her to less prison time than he got for his role in the Galleon Group LLC insider-trading scheme.

[Chiesi had an affair with former IBM executive Robert Moffat and obtained insider trading information from him. Moffat pled guilty in the case after losing his job at IBM, where he was considered a possible successor to current Chairman and CEO Sam Palmisano.

[Moffat also acknowledges in court papers that he had an “intimate relationship” with Danielle Chiesi, the Galleon hedge fund executive to whom he passed confidential information about IBM and AMD.

[“Ms. Chiesi was not the passive recipient of information from Mr. Moffat,” the filing said, according to Bloomberg. “To the contrary, she manipulated or ‘played’ him to obtain information she could use to New Castle’s advantage.”]

Mark Kurland, New Castle’s co-founder, “engaged in a ‘vicious cycle of abuse’ and ‘psychological exploitation’ to turn Dani into his ‘virtual servant,’” Chiesi’s lawyers argued in a sentencing memorandum Monday, quoting a letter to the judge from her boyfriend, Billy.

According to Billy, whose full name isn’t disclosed in her lawyers’ public filing, Kurland relocated Chiesi to San Francisco after his wife discovered their affair, which began in 1993 and lasted until both of them were arrested and charged in October 2009.
Chiesi, who was an analyst at New Castle, and Kurland both pleaded guilty in connection with a government investigation of hedge-fund insider trading centered on Galleon and its co- founder, Raj Rajaratnam. Chiesi asked U.S. District Judge Richard Holwell for less prison time than the 27 months Kurland received last year.

Chiesi, 45, pleaded guilty Jan. 19 to three counts of conspiracy, telling Holwell she was “deeply ashamed” of what she had done. Prosecutors yesterday argued that she should get from 37 and 46 months in prison when she’s sentenced June 30 in federal court in Manhattan.

Federal Prison

Kurland, 62, is serving his sentence in a federal prison in Otisville, New York, according to the Federal Bureau of Prisons website. Patrick Smith and Theodore Altman, lawyers who represent Kurland, didn’t immediately return voice-mail messages seeking comment.

“Three things in her life mattered deeply to Danielle — her family, her profession, and Mark Kurland,” her lawyers said in the court filing. Chiesi has had difficulty coping with the loss of Kurland and her job and with anxiety over the criminal charges, they said. Chiesi’s psychiatrist diagnosed her with borderline personality disorder, according to the filing.

“Dani was motivated by an unhealthy and abnormal desire to please,” her lawyers told Holwell. “The primary focus of this was Mark Kurland, but it also affected her interactions with other people in the hedge fund world and with executives at public companies.”

Inside Sources

Prosecutors said that Chiesi received inside information from sources including Hector Ruiz, the former chairman of Advanced Micro Devices Inc. (AMD), and Moffat. She passed the tips to Kurland and to portfolio managers including Rajaratnam, Steven Fortuna, Richard Choo-Beng Lee and Ali Far.

Ruiz hasn’t been charged criminally. Moffat, Fortuna, Lee and Far have all pleaded guilty. Rajaratnam was convicted May 11 of all 14 criminal counts against him.
In his own sentencing memorandum, Moffat, who said he had an intimate relationship with Chiesi, claimed she “played him” to obtain inside information.

“Chiesi operated largely on her own, and she was sufficiently experienced and sophisticated that she knew precisely what she was doing,” the government argued in its sentencing memorandum. “In short, she was not merely Kurland’s minion.”

Chiesi’s court filing quotes friends and family members who describe her as a loving person who has frequently helped friends and strangers in need.

“Danielle is even more beautiful on the inside than she is on the outside,” her sister Pamela wrote in a letter quoted in the public filing. “She is generous and caring maybe to an unhealthy extent. She freely gives her wealth and influence to those who ask — and many people have taken advantage of this generosity.”

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