A hedge fund consultant accused of fueling passion to aid insider trading pleaded guilty Wednesday to federal charges, tearfully admitting that she shared tips about public companies with others in the hedge fund industry.
The investigation that resulted in Danielle Chiesi's arrest has led to an ever-widening, ongoing federal probe of insider trading.
Chiesi, 45, entered the plea in U.S. District Court in Manhattan to three charges of conspiracy to commit securities fraud.
"By crossing the lines on these occasions I ruined a 20-year career," Chiesi said as she clutched a small water bottle. "I brought disrepute on an honorable profession."
She cried as she mentioned the pain her crimes had caused her family. Seated in the front bench among spectators were her mother, sister and two nieces.
"I'm deeply ashamed of what I did," said Chiesi, who wore a black pantsuit and had her blond hair in a chignon.
In the wider probe spurred by the case, authorities are targeting those in the securities industry who pass along secrets gleaned from employees at public companies as research.
Chiesi admitted to passing along tips to at least three other people, including hedge fund operator Raj Rajaratnam, who founded the Galleon Group of hedge funds. Rajaratnam has pleaded not guilty to federal charges and remains free on $100 million bail. He has said any trades he made were based on publicly available information.
Rajaratnam and Chiesi were considered the main defendants in a case prosecutors announced in 2009. U.S. Attorney Preet Bharara said it was the largest hedge fund insider trading case ever brought and was also unique because prosecutors for the first time made extensive use of wiretaps to detect defendants sharing financial secrets about public companies.
Prosecutors have said the Rajaratnam case generated more than $50 million in illegal profits. That included $1.7 million at New Castle, the equity hedge fund group of Bear Stearns Asset Management Inc. where Chiesi was employed.
As part of her plea deal, she agreed to forfeit any money she received from sharing inside information. But Chiesi said during her plea that she did not make any trades in personal accounts related to the information.
Alan Robert Kaufman, her lawyer, said no formula to determine what she might have to forfeit had been determined but he predicted it would be a "very, very low number."
The three counts to which Chiesi pleaded guilty carry a potential sentence of up to 15 years in prison, but a plea agreement she signed with prosecutors calls for her to receive 37 months to 46 months in prison when she is sentenced May 13. Charges originally filed against her carried a potential prison term of up to 155 years.