NEW YORK, Dec 27 (Reuters) – A divided federal appeals court on Tuesday threw out the insider trading convictions of four defendants, including two former hedge fund partners, following leaks from a U.S. health agency regarding planned changes to Medicare reimbursement rates.
In a 2-to-1 decision, the 2nd United States Circuit Court of Appeals in Manhattan dismissed fraud and theft charges against former Deerfield Management Co partners Theodore Huber and Robert Olan, the former employee of the US Centers for Medicare and Medicaid Services (CMS), Christopher Worrall, and David. Blaszczak, the founder of the political consulting firm Precipio Health Strategies.
The court agreed with prosecutors that the May 2018 convictions could not stand after a 2020 Supreme Court ruling that clarified when alleged misuse of property triggers federal fraud laws.
He also overturned conspiracy convictions against Blaszczak, Huber and Olan and ordered new prosecutions, saying it was unclear whether jurors convicted them of conduct the government no longer considered criminal.
A spokesperson for U.S. Attorney Damian Williams in Manhattan declined to comment.
Prosecutors said that in a program that ran from 2012 to 2014, Worrall briefed Blaszczak on upcoming CMS decisions, including plans to reduce reimbursements for cancer treatment with radiation therapy and kidney dialysis.
They said Blaszczak passed the information to Huber and Olan, who used it to earn $7 million by trading healthcare stocks.
The appeals court upheld the defendants’ convictions in 2019, but the Supreme Court ordered a review after ruling in the so-called “Bridgegate” case.
In that case, the Supreme Court overturned the wire fraud convictions of two defendants for closing the approaches to the George Washington Bridge in Fort Lee, New Jersey, to punish the city’s Democratic mayor for refusing to support the re-election of Republican Governor Chris Christie.
The court said the alleged scheme was not intended to obtain “property” within the meaning of the underlying fraud law.
Citing that ruling, the 2nd Circuit said the leaked CMS information was not the “property” of that agency or a “thing of value” to support allegations of fraud and theft.
Olan’s attorney, Eugene Ingoglia, said he looked forward to his client’s “full exoneration” in a new trial. Lawyers for the other defendants were not available for immediate comment.
The case is US v. Blaszczak et al, 2nd US Circuit Court of Appeals, Nos. 18-2811, 18-2825, 18-2867 and 18-2878.
Reporting by Jody Godoy and Jonathan Stempel in New York, editing by Rosalba O’Brien
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