U.S. prosecutors on Monday recommended a six-month prison term for Robert Moffat, a former IBM executive who pleaded guilty in the Galleon hedge fund insider trading probe.

Moffat, once a candidate to succeed IBM Chief Executive Officer Samuel Palmisano, is scheduled to be sentenced on September 13 in Manhattan federal court for his role in what prosecutors describe as the biggest probe of insider trading at hedge funds in the United States.

The sentence recommendation of six months imprisonment is consistent with Moffat's plea agreement in March, prosecutors wrote to presiding Judge Deborah Batts.

Prosecutors said Moffat had access to inside information regarding IBM's licensing of a deal involving Advanced Micro Devices Inc that he passed on to then New Castle Funds trader Danielle Chiesi in August 2008.

In court, he also referred to details of IBM server sales and earnings information about Lenovo Group Ltd while he was a nonvoting board member.

As far as the government has determined, his motive was to help a woman with whom he was having an intimate, personal relationship, the government's sentencing memorandum said.

It said he repeatedly engaged in his fraudulent schemes with Chiesi, knowing full well that she was going to execute securities trades for a hedge fund -- one that had approximately $1 billion under management and whose trades could certainly move the market and have a substantial effect on the integrity of the stock market.

Chiesi and the case's principal defendant, Galleon hedge fund founder Raj Rajaratnam, have pleaded not guilty to fraud and conspiracy charges regarding allegations of insider trading. They are scheduled to go on trial in January.

Chiesi's boss at the New Castle hedge fund, Mark Kurland, was sentenced in May to 27 months imprisonment after pleading guilty to criminal charges in the case.

The case is USA v Moffat, U.S. District Court for the Southern District of New York, No. 10-00270.

(Reporting by Grant McCool. Editing by Robert MacMillan)

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