May 3, 2018 / 9:15 PM / 6 months ago

Four found guilty in insider trading case linked to U.S. health agency

NEW YORK (Reuters) - Two partners at the hedge fund Deerfield Management and two others were found guilty on Thursday of charges stemming from what prosecutors have described as an insider trading scheme based on leaks from within a federal healthcare agency.

Ted Huber (C), employee of the healthcare investment fund Deerfield Management, departs Federal Court in Manhattan after an arraignment for insider trading in New York, U.S., May 24, 2017. REUTERS/Lucas Jackson

Rob Olan and Ted Huber, partners at Deerfield Management who are on leave, were convicted of counts including wire fraud, securities fraud and conversion of government property, as was David Blaszczak, founder of political consulting firm Precipio Health Strategies.

Christopher Worrall, who worked for the U.S. Centers for Medicare and Medicaid Services (CMS), was also convicted of wire fraud and conversion of government property, but acquitted of securities fraud. The verdict was handed down by a jury in Manhattan federal court after nearly four days of deliberations, following a four-week trial.

Lawyers for Huber and Worrall had no immediate comment. Lawyers for Olan and Blaszczak could not immediately be reached. A Deerfield spokesman declined to comment.

The four men were charged with fraud, conspiracy and misappropriating government property in May 2017.

Prosecutors said in an indictment that Worrall tipped Blaszczak about upcoming decisions from CMS, which decides how much government insurance programs will reimburse healthcare companies. They said Blaszczak passed the information on to Huber and Olan, who used it to make profitable trades.

Blaszczak himself had worked at CMS, and kept in touch with Worrall after he left, according to prosecutors. Worrall’s illegal tips to Blaszczak included advance notice about rules cutting reimbursement rates for radiation cancer treatment and dialysis, allowing Deerfield to profit by trading in companies affected by the rules, prosecutors said.

The companies involved included radiation oncology companies Accuray Inc and Varian Medical Systems, and dialysis companies DaVita Healthcare Partners Inc, NxStage Medical Inc and Fresenius Medical Care, a unit of Fresenius Medical Care AG of Germany, according to the indictment.

Prosecutors said the scheme ran from about 2009 to 2014.

In a related civil case, the U.S. Securities and Exchange Commission said the scheme yielded $3.9 million in profits and at least $193,000 in consulting fees for companies where Blaszczak worked.

Deerfield agreed in August to pay $4.6 million to the SEC to settle claims related to the criminal case. It did not admit or deny wrongdoing.

Reporting by Brendan Pierson in New York; Editing by Tom Brown and Matthew Lewis

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