United States v. Blaszczak

David Blaszczak and Christopher Worrall (defendants) worked together at the Centers for Medicare and Medicaid Services (CMS). Blaszczak left to become a hedge-fund consultant. Theodore Huber and Robert Olan (defendants) were partners at Deerfield, a hedge fund. Worrall gave Blaszczak nonpublic information about upcoming CMS rule changes. Blaszczak gave the information to Huber and Olan. Each time, Deerfield shorted stock in medical companies that declined when CMS publicly announced the new rules. The government (plaintiff) brought charges of conspiring to misappropriate and convert nonpublic information, wire fraud, and securities fraud under Title 18, and securities fraud under Title 15. Blaszczak was also charged with defrauding the United States under 18 U.S.C. § 371. The Title 18 wire-fraud and securities-fraud charges required that the object of the conduct be either money or property; the Title 18 conversion charge required that the object be money or a thing of value. 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 on Title 18 securities fraud and conspiracy. All four appealed on multiple grounds. The court of appeals affirmed. The United States Supreme Court remanded the case to the court of appeals in light of Kelly v. United States, which clarified what constituted property for purposes of Title 18 charges. On remand, the government agreed that the CMS information did not constitute property or a thing of value. Accordingly, the government agreed that convictions related to property should be dismissed. However, the government sought affirmation of the conspiracy charges, arguing that the conspiracy was not only to convert government property but also to commit fraud that did not require the information to be property.