THE GALLEON INSIDER TRADING CASE: A KEY GUILTY PLEA
In what is beginning to look like a continuing stream of guilty pleas, Danielle Chiesi pleaded guilty in the Galleon insider trading cases. She is one of the original defendants in the Galleon cases. Ms. Cheisi pleaded guilty to three counts of conspiracy to commit securities fraud. She had been scheduled to stand trial in April 2011. Sentencing is scheduled for May 13, 2011. According to new reports, Ms. Cheisi is not cooperating with prosecutors.
Ms. Chiesi was formerly employed at New Castle Funds, LLC, an equity group once affiliated with Bear Stearns Asset Management, Inc. The original criminal complaint in which she was named also included Mark Kurland of New Castle and Robert Moffat, a former senior vice president and group executive at IBM. The complaint charged Ms. Chiesi with three counts of conspiracy and three counts of securities fraud. It detailed a fraudulent scheme involving trading in the shares of Akamai, Inc., AMD, IBM and Sun Microsystems. The charges against Ms. Chiesi were expanded in a superseding indictment to included three counts of conspiracy and seven counts of securities fraud.
Messrs. Moffat (here) and Kurland previously pleaded guilty. Both pleaded to charges of conspiracy and securities fraud. Mr. Kurland declined to cooperate with prosecutors. He was sentenced to serve twenty-seven months in prison followed by two years of probation. He was also ordered to forfeit about $900,000 (here).
Raj Rajaratnam, the founder of the Galleon hedge fund, was charged at the same time as Ms. Chiesi (here). The initial charges against him were based on overlapping insider trading schemes alleged to have begun as early as 2006. Those schemes were more expansive than the ones involving Ms. Chiesi. They included trading in the securities of Polycom, Hilton Hotels, Google and Clearwire in addition to Akamai, ADM, Intel and Sun. The charges against Mr. Rajaratnam were expanded at the same time the superseding indictment was handed down against Ms. Chiesi. The trial of Mr. Rajaratnam is scheduled to begin late next month.
The SEC also filed an action against Ms. Chiesi, Mr. Rajaratnam and others. That case is pending. SEC v. Galleon Management, LP, Civil Action No. 09-CV-881 (S.D.N.Y. Oct. 16, 2009).
Correction: The report of the jury’s verdict in SEC v. Delphi (Jan. 12, 2011) as to defendant Paul Free is incorrect. As noted the jury found Mr. Free and co-defendant J.T. Battenberg not liable on a fraud charge but held against each man on other non-fraud charges. However, Mr. Free was also found liable other fraud charges. My apologies for the error.