Aaron Pressman

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Hedge fund manager looks to higher authority on insider trading

April 7, 2010

With all the insider-trading scandals swirling around the hedge fund industry, it’s no surprise to see portfolio managers meeting with lawyers, accountants and regulators. But some investors caught up in the investigations are also seeking advice from a higher authority.

On Tuesday evening, while waiting for a large pizza with peppers, onions and artichokes at an upscale joint in suburban Needham, Mass., I happened to overhear a Boston hedge fund manager and a female companion conferring with a priest. Tucked into a corner booth at Not Your Average Joe’s restaurant, the manager spoke loudly and passionately about his predicament.

The manager told the priest he had received information about some hot stocks from “Danielle” and traded on it. But he got caught because federal authorities were taping the phone calls.

The identity of the manager is not clear, although the “Danielle” the manager referred to could be Danielle Chiesi, the former New Castle Partners executive, who prosecutors have charged with being of the central figures in the big Galleon insider trading case.

One of five known cooperating witnesses in the Galleon case, Steven Fortuna, a co-founder of S2 Capital who pleaded guilty last fall to securities fraud charges, lives near Boston in Westwood, one town over from Needham.

Chieisi most notably is charged with passing on stock tips to Galleon co-founder Raja Rajaratnam.

Prosecutors have alleged that Fortuna also exchanged insider trading information with Chiesi.

Alan Kaufman, Chiesi’s attorney, declined to comment. Also not commenting on the incident was Fortuna’s attorney, Richard Schaeffer.

The priest could not be identified.

While use of church confessionals has waned, fund managers ensnared in scandal and in search of spiritual guidance might be best advised to discuss their predicaments in a more private setting.