Steven Fortuna, a Wall Street financial executive whose information helped lead to the conviction of former IBM executive Robert Moffat in a huge insider trading case, is sentenced to probation after helping the government build its case.

The case exploded in October 2009, and within a matter of months Moffat lost his IBM (NYSE: IBM) job then later pleaded guilty.

Moffat, once consider a successor to then-Chairman and CEO Sam Palmisano, also had numerous connections to the Triangle. He was actively involved in IBM’s PC division, which he helped sell to Lenovo in 2005. He also at one time served as an advisor to Lenovo, which operates its executive headquarters in Morrisville.

Fortuna, a hedge-fund manager, had pleaded guilty and assisted in the insider-trading probe of Galleon Group LLC and other federal investigations. On Wednesday he was sentenced to two years’ probation and six months’ home confinement.

U.S. District Judge Sidney Stein in Manhattan, who presided over the case, also ordered Fortuna to speak to graduate business students at Columbia University and undergraduates at Boston University, where he obtained his degrees.

“To the extent possible, Mr. Fortuna can speak at his college and school of business and other institutions about his own situation and how easily it is for him and others to have committed this crime and the difficulties he’s encountered as a result,” Stein said yesterday as he imposed the sentence.

Federal prosecutors filed papers last week seeking leniency for Fortuna, the co-founder and former managing director at S2 Capital LLC in Boston, saying he “immediately” agreed to cooperate with the U.S. when FBI agents first approached him on April 1, 2009. Fortuna pleaded guilty to federal insider-trading charges in October 2009.

“I made a grievous mistake, I chose to act on inside information I received when I should not have; now everything I worked for has been destroyed,” Fortuna, 50, told Stein before being sentenced. “I ask your honor to please consider the grievous mistake as aberrational in what I like to think is otherwise an honorable life.”

Intended Sentence

Stein said he arrived in court intending to impose some kind of term of imprisonment upon Fortuna for breaking securities laws and engaging in insider trading. The judge, who said Fortuna had faced 37 to 46 months in prison, questioned the extent of Fortuna’s cooperation with the U.S. probe. The judge also questioned an assertion made by Fortuna’s lawyer, Francis Dimento, that his client was destitute.

Assistant U.S. Attorney Antonia Apps told Stein that Fortuna made more than 400 recordings of conversations with six friends and colleagues targeted in the crackdown on insider trading at hedge funds.

Apps said Fortuna also wore a concealed body wire and recorded conversations with targets of the investigation at the behest of Federal Bureau of Investigation agents.

She said he also told investigators and prosecutors about crimes they didn’t know he had committed.

400 Calls

“The number is significant, there were more than 400 calls and also meetings where he wore a body wire,” Apps said. “This is a serious crime, no question about it. But without cooperating witnesses, there are cases that we cannot bring.”

Fortuna’s cooperation helped lead to the guilty plea by Danielle Chiesi, a former New Castle Partners portfolio manager, Apps said. Chiesi was sentenced to 30 months in prison after admitting she passed illegal tips to Fortuna and Galleon co-founder Raj Rajaratnam, among others.

His information also helped prosecutors win a guilty plea from Moffat, Apps said. Moffat admitted he passed tips about IBM and other companies to Chiesi, with whom he was having an affair. He was sentenced to six months in prison.

Continuing Probes

Apps said Fortuna’s cooperation with the government continues in insider-trading investigations, the details of which were redacted from the public version of her letter.

Dimento told Stein that prosecutors had described Fortuna’s work as “extraordinary” and said he has also continued to cooperate with the U.S. by speaking to FBI agents, describing to them how the hedge fund industry works.

“No I don’t think it is,” Stein said. “I think it’s solid, but it’s not extraordinary.”

The judge questioned Dimento’s claim that Fortuna was “living from hand to mouth,” noting that court officials said in a presentence report that the defendant had a house in Westwood, Massachusetts, a summer home in Lenox, Massachusetts, an art collection, and five cars, including a Maserati, two Porsches, a BMW and a Mercedes Benz.

“You can’t make out an argument that the man is destitute,” Stein said.

While the judge didn’t impose a fine on Fortuna, Stein did order him to perform 120 hours of community service during each of the two years he is on probation. Stein directed that Fortuna speak publicly about insider trading at his two alma maters and any others suggested by the government or court officials.

Business, Family

“Mr. Stein, I really think you certainly understand the seriousness of your crime,” Stein said. “I don’t think I need to be concerned about your individual deterrence and committing other crimes. Just stay away from the securities industry, stay away from any illegal activity. Focus on your business and your family and you’ll be alright.”

Fortuna admitted to three counts of conspiracy, each with a maximum possible penalty of five years in prison, and one count of securities fraud, which carries a maximum prison sentence of 20 years.

When Fortuna pleaded guilty, he said he was tipped to inside information by “several individuals” at other funds, according to a court transcript. He didn’t identify the tipsters in court.

Fortuna told Stein he is attempting to start a beverage business in the Boston area.

More than 70 people have been charged and convicted with insider trading since August 2009 as part of a nationwide crackdown by the Federal Bureau of Investigation in New York and the office of U.S. Attorney Preet Bharara in Manhattan. Fortuna is one of 22 people who pleaded guilty in the Galleon probe.

The case is U.S. v. Fortuna, 09-cr-1003, U.S. District Court, Southern District of New York (Manhattan).

(Bloomberg news contributed to this report.)