Hedge Fund Manager Gets Probation For Cooperation

Feb 14 2013 | 11:29am ET

The parade of insider-trading cooperating witnesses into—and out of—Manhattan federal court to face sentencing continued yesterday with former hedge fund manager Steven Fortuna.

Fortuna, who recorded more than 400 phone calls and wore a body wire at least 13 times while cooperating with the government, became the latest such witness spared prison time. U.S. District Judge Sidney Stein sentenced him to two years' probation, including six months of house arrest. He was also ordered to forfeit $200,000, but was not fined, in recognition of his cooperation; he agreed in 2011 to pay $300,000 to settle the Securities and Exchange Commission's case against him.

Fortuna, who ran S2 Capital Management in Boston, began cooperating shortly after he was approached by the Federal Bureau of Investigation almost three years ago. His assistance led directly to the guilty pleas of Danielle Chiesi, Galleon Group founder Raj Rajaratnam's one-time co-defendant, and one of her sources, former top International Business Machines executive Robert Moffat. The two were having an affair.

"His information and his consensual calls really did assist in the prosecution," prosecutor Antonia Apps said.

"I am deeply sorry for my very poor judgment," Fortuna, who pleaded guilty to insider-trading in 2009, said.

Fortuna is the fifth cooperating witness in the federal insider-trading crackdown to be sentenced in recent weeks. Only one, Roomy Khan, received a jail sentence; prosecutors said she had routinely lied to authorities.

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