Danielle Chiesi, a former beauty-queen-turned-hedge-fund-trader and a co-conspirator of Galleon's Raj Rajaratnam, received a 30-month prison sentence from Judge Richard Holwell.  Ms. Chiesi, who apologized as she choked back tears, got a thrill about pumping insiders and snaring secret tidbits about companies.  The feds recorded her telephone conversation saying, “It’s a conquest,” and “It’s mentally fabulous for me.”

In January, Ms. Chiesi pleaded guilty to 3 counts of participating in the conspiracy and she acknowledged leaking information about IBM, Advanced Micro Devices and Sun Microsystems.  Her activities allegedly earned her $1.7 million.

Judge's Stern Sentence.   Prosecutors sought a sentence of up to 46 months, while Ms. Chiesi’s lawyers asked for leniency, blaming her actions on a tormented love affair with her former boss.  The judge chose a strong sentence.  In addition to her prison term, Ms. Chiesi also was sentenced to 2 years of supervised release, 250 hours of community service, a $25K fine, and mandatory mental health and alcohol treatment.

The message to Wall Street needs to be clear: if you trade on inside information, you will be caught."  -- Judge Holwell.

He added that the community service, in particular, would help “adjust her moral compass, which obviously fell by the wayside.”  He did acknowledge that Ms. Chiesi, who previously told the judge that she was receiving psychiatric care, suffered from a borderline personality disorder.

Raj Rajaratnam Scheduled for 9/27.  Ms. Chiesi's co-conspirator, Galleon head Raj Rajaratnam, is next up next in the government’s huge insider trading investigation.  He was convicted in May by a jury trial.  Ms. Chiesi didn't testify against Mr. Rajaratnam, but her recorded voice was regularly featured at his trial.  These conversations, along with the testimony of Adam Smith, a former Galleon employee, proved crucial.  Mr. Rajaratnam is set to be sentenced on 9/27/11 - he faces up to 25 years in prison.

Chiesi's Wall Street Career.   Born in Binghamton, NY, Chiesi began on Wall Street in the late 1980s;  she later landed at New Castle Funds, a hedge fund spun off from Bear Stearns.  Ms. Chiesi, 45, became known on Wall Street for her colorful personality and robust rolodex. Her specialty was the technology world, in which she built a network of sources whom she prodded for corporate secrets. Her tipsters included Robert Moffat Jr., a former senior executive at IBM, who has since pleaded guilty to participating in the scheme.

After gathering a few nuggets, Ms. Chiesi would pass on the information to Mr. Rajaratnam, among other  traders. In July 2008, a source informed Ms. Chiesi that Internet company Akamai was going to report less than stellar results. “I just got a call from my guy,” she later told Mr. Rajaratnam. “I played him like a finely tuned piano.”  Unbeknownst to both, the government was listening. Such secretly recorded tapes ultimately became the lynchpin in the government’s case.  They also provided a window into Ms. Chiesi’s flirtatious style.

She alternately referred to Mr. Rajaratnam as “baby” and “honey.” She also struck up romances with Mr. Moffat of I.B.M. and Mark Kurland, her boss at New Castle.  Her affair with the married Mr. Kurland lasted for nearly 20 years and spanned across jobs.  A 22-year-old Ms. Chiesi met Mr. Kurland, then 40, in 1988 while working at a brokerage firm in New York.  Mr. Kurland later launched New Castle, and hired his lover to join the team.  Both eventually joined the insider-trading ring. Mr. Kurland already pleaded guilty to insider trading, and was sentenced to 27 months in prison.

Ms. Chiesi’s lawyers blamed the affair — and Mr. Kurland — for involving her in the illicit plot.  Her “emotional and financial wellbeing were inextricably linked with Kurland,” her lawyer, Mr. Kaufman, said in a recent court filing. Her counsel continued to emphasize the connection at the sentencing.

“We continue to believe that Dani’s sentence should not have been any longer than the sentence received by her boss at New Castle,” Mr. Kaufman said on Wednesday. “But we respect the judges thoughtfulness and thoroughness.”  While Ms. Chiesi initially fought the charges, ultimately, the government’s secret recordings were insurmountable. Some of the recorded conversations even proved prophetic.  “You put me in jail if you talk,” she said on an August 2008 call with an associate. “I’m dead if this leaks. I really am, and my career is over.”

For further details, go to:   [DealBook, 7/20/11, "Chiesi Sentenced .."]