Galleon Insider-Trader Chiesi Sentencing Tomorrow

Jul 19 2011 | 12:50pm ET

Danielle Chiesi's sentencing tomorrow for her role in the Galleon Group insider-trading scandal will not only make her a resident of a federal penitentiary for as much as four years—it will also make her a liar, or at least prove she isn't clairvoyant.

Chiesi will learn her fate in Manhattan federal court more than a year-and-a-half after promising that neither she nor her then co-defendant Raj Rajaratnam would spend any time in the clink.

"There is not even a chance we will do one day in jail," Chiesi told Reuters.

A year later, she was pleading guilty to conspiracy to commit fraud, all but guaranteeing she would. Exactly how many days she will spend in jail is in the hands of U.S. District Judge Richard Holwell.

Prosecutors are seeking between 37 and 46 months for the 45-year-old former beauty queen, who did not testify against Rajaratnam. Chiesi's attorneys have asked for significantly less time than the 27 months her boss—and former lover—at New Castle Partners, Mark Kurland, received.

Some are watching Chiesi's sentencing as a barometer for Rajaratnam, who was convicted of running the insider-trading scheme in May and who faces almost 20 years in prison.

"If [Holwell] suggests that people were really hurt, then he might come down hard" on Rajaratnam, Stanley Twardy, a former U.S. attorney in Connecticut, told Reuters. "If he suggests the conduct was typical Wall Street conduct, it might signal that he would not be as tough."

Meanwhile, the former prosecutor who helped put together the cases against Rajaratnam and Chiesi says their sentencings will bring "closure."

"I definitely did feel a sense of having achieved certain goals, and of having had an input in making a dent in combating a certain type of activity that has proven difficult to identify and prosecute," Joshua Klein told Bloomberg News.

Klein, who left the U.S. Attorney's Office in Manhattan right around the time Chiesi was promising not to do any time to found his own law firm, was instrumental in pushing for wiretaps in the case, alongside fellow former prosecutors Lauren Goldberg.

Klein "was the guy putting it together," Jeffrey Bornstein, a lawyer for one of the men who pleaded guilty in the Galleon case and cooperated with prosecutors, told Bloomberg. "He was a very formidable, strong-willed advocate for the government."

Klein did not attend any of Rajaratnam's trial and won't be there tomorrow when Chiesi is sentenced. "But I'll be watching," he said. "When you live with a case for a long time, you cannot completely separate yourself from it."


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