April 2, 2018 / 10:00 AM / a year ago

Four charged with trading on U.S. health agency leaks face trial

NEW YORK, April 2 (Reuters) - A Washington political consultant, a federal government employee and two former partners at an investment advisory firm are set to face trial on Monday on federal charges that they ran an insider trading scheme based on leaks from within a federal healthcare agency.

Jurors in federal court in Manhattan are expected to hear opening statements from prosecutors and from lawyers for David Blaszczak, founder of Precipio Health Strategies; Rob Olan and Ted Huber, formerly partners at Deerfield Management; and Christopher Worrall, who worked for the U.S. Centers for Medicare and Medicaid Services (CMS).

According to prosecutors, Worrall tipped Blaszczak about upcoming decisions from CMS, which decides how much government insurance programs will reimburse healthcare companies, and Blaszczak passed the information on to Huber and Olan, who used it to make profitable trades.

The four defendants were arrested in May 2017 and have pleaded not guilty. Lawyers for Huber and Worrall declined to comment. Lawyers for Blaszczak and Olan could not immediately be reached.

Prosecutors said in an indictment that Blaszczak previously worked at CMS and kept up a relationship with Worrall after he left. They said 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.

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.

Blaszczak is also charged with passing confidential information to another hedge fund, Visium Asset Management, which shut down in 2016 after several of its employees were accused of fraud. The charges do not involve the other three defendants.

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 Leslie Adler)

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