Mark Kurland, a co-founder of New Castle Funds LLC, asked a judge to give him probation when he becomes the first defendant sentenced in the Galleon Group LLC insider-trading case that snared Raj Rajaratnam.
Kurland, 51, pleaded guilty on Jan. 27 and is scheduled to learn his fate May 27. Unlike most others who have pleaded guilty in the case, he isn’t cooperating with prosecutors.
“In the summer of 2008, Mark made the worst decision of his life,” defense attorney Patrick Smith wrote in a brief made public today in federal court in Manhattan. “He destroyed the career and reputation he had carefully built over 25 years by allowing the funds he managed to trade while he had inside information about three companies.”
Kurland is among 21 people charged since October in two waves of arrests. Among them are Galleon co-founder Rajaratnam, who is charged with using confidential tips to earn millions of dollars on illegal stock trades, and Danielle Chiesi, whom Kurland supervised at New York-based New Castle. Both deny wrongdoing.
Federal sentencing guidelines recommend 24 to 30 months of prison because one of the three illegal trades generated a $900,000 profit, according to Smith’s brief. The two other trades ended in losses.
Still, the lawyer urged U.S. District Judge Victor Marrero to disregard the guidelines, saying Kurland had a “minor” role in the crime and because he didn’t profit personally from the illegal trades, has a history of charitable giving and has suffered medical problems.
The $900,000 is “of no consequence to the performance of a portfolio of approximately $1 billion,” Smith wrote. “Mark personally earned nothing and it was never part of any plan or discussion that he would.”
In his guilty plea to conspiracy and securities fraud, Kurland didn’t name Chiesi or anyone else. He admitted that he used secret tips when trading in Advanced Micro Devices Inc., Akamai Technologies Inc. and Sun Microsystems Inc. while at New Castle from August 2008 to January 2009. The sole profit came in the Sun trade.
Chiesi’s research job at New Castle required her to develop sources to generate trading ideas, according to the brief. One of her sources was Robert Moffat, a former senior vice president at International Business Machines Corp., and “a contact at Akamai,” Smith wrote.
“Chiesi was an advocate for her trading ideas,” according to the brief. “Regrettably, Mark permitted some of these discussions with Chiesi to go too far. Chiesi gave to Mark what he knew to be misappropriated material non-public information concerning three companies.”
During the summer of 2008, Kurland listened to a telephone call between Moffat and Chiesi about a planned restructuring at AMD, Smith said. New Castle’s ensuing trade resulted in a $4.7 million loss. Chiesi told Kurland in September 2008 that her source at Akamai said, incorrectly, that the company would be “taken out” in a takeover, according to the brief. New Castle lost $1.1 million.
In January 2009, Moffat gave Chiesi inside information about Sun’s performance, generating a trading profit for New Castle of about $900,000, Smith wrote in the brief.
Moffat pleaded guilty to securities fraud and conspiracy in March.
Kurland was recorded on government wiretaps of Chiesi talking about the scheme, according to court papers in the case. In one recording, he is heard encouraging Chiesi to meet more people who would provide tips, according to court filings.
“Chiesi is responsible for involving him in the unlawful inside trading conspiracy,” according to Kurland’s brief. “Mark is significantly less culpable than Chiesi and Moffat.”
Alan Kaufman, a lawyer for Chiesi, said he hadn’t seen the brief and declined to comment.
The case is U.S. v. Kurland, 10-cr-69, U.S. District Court, Southern District of New York (Manhattan).