Chiesi gets 2-1/2 years prison in U.S. insider case

Danielle Chiesi arrives at the Federal Courthouse for sentencing related to the Galleon hedge fund insider trading case in New York July 20, 2011.

NEW YORK (Reuters) - Danielle Chiesi, a former hedge fund trader and key defendant in the sprawling Galleon Group insider trading case, was sentenced on Wednesday to 2-1/2 years in prison.

She is the first major defendant to be sentenced in the government's probe, unveiled in October 2009 and centred on Raj Rajaratnam, founder of the Galleon hedge fund.

"The message to Wall Street needs to be loud and clear: If you trade on inside information, you will be caught; if convicted, you will be sentenced to prison," said U.S. District Judge Richard Holwell in Manhattan after pronouncing the sentence.

The 45-year-old Chiesi, who wore a pale pink sleeveless silk dress and a pearl necklace, was also sentenced to two years of supervised release plus 250 hours of community service. She had pleaded guilty in January to three conspiracy counts.

"It won't happen again," Chiesi told the judge just before being sentenced.

Rajaratnam was convicted in May, and faces a September 27 sentencing, also by Holwell.

Prosecutors called Chiesi the "consummate Wall Street insider." They said she would use her charm and physical appeal to talk up powerful sources, and then get and leak inside tips about corporate activity.

Technology companies such as Advanced Micro Devices Inc (AMD.N), Akamai Technologies Inc (AKAM.O) and International Business Machines Corp (IBM.N) were the subject of several of these tips, and Chiesi made $4 million from insider trading, prosecutors said.

(Reporting by Basil Katz and Jonathan Stempel, editing by Gerald E. McCormick)