By Brendan Pierson
NEW YORK (Reuters) - Five men, including a Washington political consultant and a federal employee, were criminally charged on Wednesday with engaging in an insider trading scheme based on leaks from within a federal healthcare agency.
Federal prosecutors in Manhattan announced the arrests of political consultant David Blaszczak, founder of Precipio Health Strategies; U.S. Centers for Medicare and Medicaid Services (CMS) employee Christopher Worrall; and Rob Olan and Ted Huber, employees of the healthcare hedge fund Deerfield Management.
Olan's lawyer, Eugene Ingoglia, said in an email that Olan was "an innocent man." Huber's lawyer, Barry Berke, said that Huber "did absolutely nothing wrong."
Jordan Fogel, a former employee at New York-based Deerfield, who was also charged, pleaded guilty on Friday.
“Jordan looks forward to resolving this and moving on,” said Marc Mukasey, Fogel's lawyer.
A spokeswoman for Dentons, a law firm representing Worrall, had no immediate comment. A lawyer for Blaszczak could not immediately be reached.
Prosecutors said that from 2012 to 2014, Olan, Huber and Fogel schemed to get confidential information about CMS's internal decision-making from Blaszczak, who previously worked there. Blaszczak in turn got the information from his former colleague and "close friend" Worrall, prosecutors said.
CMS, part of the Department of Health and Human Services, oversees government health insurance programs. The confidential information included advance notice about rules cutting reimbursement rates for radiation cancer treatment and dialysis, allowing Deerfield to short healthcare companies affected by the cuts.
The companies included radiation oncology companies Accuray Inc and Varian Medical Systems, and dialysis companies DaVita Healthcare Partners Inc and Fresenius Medical Care, a unit of Fresenius Medical Care, AG of Germany, among others, according to the indictment.
According to a related complaint by the U.S. Securities and Exchange Commission, the scheme yielded $3.9 million in profits and at least $193,000 in consulting fees for Blaszczak's companies.
Worrall and Blaszczak's relationship went back years, prosecutors said. In 2011, Blaszczak arranged a job interview at a private consulting firm for Worrall, and in 2014 he asked Worrall to become a co-owner of a new firm.
The defendants are charged with securities fraud, wire fraud, conspiracy and conversion of property of the United States.
The new arrests are the latest development in a wide-ranging investigation that previously led to charges against three ex-employees of Jacob Gottlieb's Visium Asset Management hedge fund, prompting the $8 billion firm's wind-down.
(Reporting by Brendan Pierson in New York; Editing by Lisa Von Ahn and James Dalgleish)