A major player in the Raj Rajaratnam insider trading ring is pleading for a lenient prison sentence because her crimes were driven by psychological and emotional forces.  Danielle Chiesi, the former beauty queen turned convicted trader, deserves a lenient prison sentence because her crimes were the result of a tortured love affair with her boss, her lawyers said.

“The punishment due for the conduct at issue here should be mitigated once it is recognized as the manifestation of the psychological and emotional forces impacting on Danielle Chiesi, rather than the result of greed and venality.”   - - Alan Kaufman, a lawyer for Ms. Chiesi, in a court filing that at times reads more like a Harlequin romance novel than it does a legal brief.

Ms. Chiesi pleaded guilty in January to participating in an insider trading conspiracy with Raj Rajaratnam, the Wall Street investor who was found guilty by a jury last month.  At the sentence hearing, federal prosecutors called Ms. Chiesi the “consummate Wall Street insider” who engaged in a “broad and far-reaching” criminal scheme.  They asked the judge to sentence her to as many at three years and 10 months in prison.  Her sentencing is set for June 30.

The Kurland Affair.   Yet, her lawyers, who called her “Dani” throughout the filing, blamed her actions in part on Mark Kurland, her boss at New Castle and lover for almost 20 years.  Her “emotional and financial well-being were inextricably linked with Kurland.”   Mr. Kurland pleaded guilty to insider trading crimes in January 2010 and was sentenced to 27 months in prison.  Ms. Chiesi’s sentence, argued her lawyers, should be less than that.

 Ms. Chiesi began dating Mr. Kurland in 1988, when she was a 22-year-old junior institutional sales representative at Mabon Nugent, a brokerage firm where Mr. Kurland, then 40, was an executive.  The married Mr. Kurland eventually moved to Bear Stearns, where he became CEO of Bear's asset management business and later the head of the bank’s internal hedge fund, New Castle.  In 1996, Ms. Chiesi joined New Castle.

Ms. Chiesi’s lawyers said that although Ms. Chiesi trafficked in inside information from corporate tipsters while at New Castle, she never paid for information and never traded in her own account.  She instead shared it with Mr. Kurland, her lawyer said.  He futher noted that: 

“The dozens of recorded conversations between Ms. Chiesi and Mr. Kurland are replete with examples of Kurland encouraging her to get information, of Kurland belittling her ability to analyze financial data, of Kurland being the New Castle decision maker regarding investment decisions.”

“Dani was, and will say today that she still is in love with him.  She resists the idea that Kurland used her for his own purposes, and the truth of that long relationship is probably far more complicated than any of us can know.”

Other Relationships.   A former boyfriend of Ms. Chiesi’s referred to only as “Billy” apparently claims to know.  Quoting a letter from Billy submitted to the judge, her lawyer said that Mr. Kurland engaged in a “vicious cycle of abuse” and “psychological exploitation” to turn Dani into his “virtual servant.”

Ms. Chiesi, who was divorced from what her lawyers described as an “abusive ex-husband,” used her sexuality to gain an investment edge on Wall Street, engaging in affairs with other sources. She had an intimate relationship with Robert Moffatt, a former senior executive at I.B.M. who is serving prison time after admitting to leaking confidential information to Ms. Chiesi.

During one secretly recorded telephone conversation played during Mr. Rajaratnam’s trial, Ms. Chiesi told Mr. Rajaratnam that pumping corporate insiders for secret information excited her.  “It’s a conquest,” she said. “It’s mentally fabulous for me.”

Federal prosecutors dismissed the idea that Ms. Chiesi was controlled by her boss or anyone else.  “Chiesi operated largely on her own, and she was sufficiently experienced and sophisticated that she knew precisely what she was doing,” the government said in its filing. “In short, she was not merely Kurland’s minion.”  

For further details, go to:   [Dealbook, 6/14/11]