UPDATE 2-New Castle Partners' Kurland on leave, Chiesi out

NEW YORK, Oct 20 - New Castle Partners LLC, a hedge fund swept up in the biggest insider-trading scandal in years, said co-founder Mark Kurland has taken a leave of absence and that Danielle Chiesi, a consultant, is no longer associated with the firm.

Kurland and Chiesi were among six people, including Galleon Group founder Raj Rajaratnam, charged on Friday by the U.S. Justice Department and the U.S. Securities and Exchange Commission of reaping more than $20 million by trading on inside information from about a dozen companies.

A spokesman for New Castle, formerly part of Bear Stearns Asset Management, said the nearly $1 billion New York-based investment firm continues to do business.

"New Castle remains fully committed to serving the best interests of its clients," it said in an e-mailed statement. "The firm manages liquid equity securities strategies and has a highly experienced and cohesive investment management team that remains fully engaged."

Kurland, who headed Bear Stearns Asset Management in the early 1990s, launched New Castle with Robert Reitzes in 1995. The fund was one of several that JPMorgan Chase & Co spun out to their managers after the big bank acquired the nearly insolvent Bear last March.

New Castle linked up with Mariner Investment Group, a 17-year-old New York firm that invests in hedge funds and is led by Chairman William Michaelcheck, a former senior managing director at Bear.

JPMorgan officials declined to comment.