United States v. Blaszczak

David Blaszczak and Christopher Worrall (defendants) worked together at the Centers for Medicare and Medicaid Services (CMS). They remained friends when Blaszczak left to become a hedge-fund consultant, and Blaszczak continued to enjoy unique access to CMS information. Theodore Huber, Robert Olan (defendants), and Jordan Fogel were partners at Deerfield Management Company, L.P. (Deerfield), a healthcare-focused hedge fund. On four occasions, Blaszczak gave the Deerfield partners nonpublic information about upcoming CMS rule changes. Each time, Deerfield shorted stock in medical companies that would be negatively impacted when CMS announced the new rules. All told, Deerfield profited over $7 million trading on confidential CMS information. The government charged Blaszczak, Worrall, Huber, and Olan with conspiring to misappropriate and convert nonpublic information, wire fraud, and securities fraud under Titles 15 and 18. Fogel pleaded guilty and testified against the others. The district court instructed the jury that to convict for Title 15 securities fraud, Worral must have tipped the CMS information in exchange for a personal benefit. The judge refused to issue the same instruction for wire fraud and securities fraud under Title 18. The jury acquitted as to Title 15 securities fraud but convicted Blaszczak, Worrall, Huber, and Olan of wire fraud and conversion, and all but Worrall of Title 18 securities fraud and conspiracy. All four appealed, arguing that confidential government information was not property for Title 18 purposes and that the personal-benefit test applied to Title 18 wire and securities fraud.