United States v. Blaszczak

947 F.3d 19 (2nd Cir. 2019)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

Olan, Huber, and fellow Deerfield partner Jordan Fogel approached Ds for the purpose of obtaining so-called 'predecisional' information concerning CMS's contemplated rules and regulations. The Deerfield partners knew that D, who had worked at CMS before becoming a consultant for hedge funds, enjoyed unique access to the agency's predecisional information through his inside sources at the agency. D passed them nonpublic CMS information concerning both the timing and substance of an upcoming proposed CMS rule change that would reduce the reimbursement rate for certain radiation oncology treatments. Olan, Huber, and Fogel entered orders shorting $33 million worth of stock in radiation-device manufacturer Varian Medical Systems. They made $2.76 million in profits. In 2012, Ds again provided predecisional CMS information about additional radiation oncology reimbursement rate changes. They earned profits of $2.73 million from trades relating to this radiation oncology rule, which was publicly announced on July 6, 2012. In June 2013, D told Fogel that he expected CMS to propose cutting the reimbursement rate for end-stage renal disease treatments by 12 percent. They earned approximately $860,000 in profits from the trade. Yet another trade was made with profits of approximately $791,000. D also provided similar information to Christopher Plaford, a portfolio manager at the hedge fund Visium. D would provide him with both public and nonpublic information concerning the healthcare industry. Plaford made money on trades as well. They got caught and Ds were tried. The district court instructed the jury that wire fraud 'includes the act of embezzlement, which is the fraudulent appropriation to one's use of the money or property entrusted to one's care by someone else.' It instructed the jury, for the Title 18 securities fraud counts, that it could find the existence of a scheme to defraud if a defendant 'participated in a scheme to embezzle or convert confidential information from CMS by wrongfully taking that information and transferring it to his use or the use of someone else.' It instructed the jury it could only convict if it found that D knowingly and willfully participated in the fraudulent scheme. The jury acquitted all defendants on the Title 15 securities fraud counts. It found all defendants but Worrall guilty of the conspiracy offenses charged in Counts One and Two as well as Title 18 securities fraud as charged in Count Ten; and Blaszczak (D) alone guilty of the offenses charged in Counts Thirteen and Fifteen through Eighteen. Ds appealed. Ds argue in part that the confidential CMS information at issue is not 'property' in the hands of CMS for purposes of the wire fraud and Title 18 securities fraud statutes.