Linus Unah – Fourth Estate Contributor
Washington, DC, United States (4E) – The U.S. Securities and Exchange Commission (SEC) has announced charges against a former government employee in an alleged insider trading scheme.
The SEC said the scheme involved tips of nonpublic information about government plans to cut Medicare reimbursement rates, which affected the stock prices of certain publicly traded medical providers or suppliers
The SEC’s complaint alleged that David Blaszczak, a former government employee turned political intelligence consultant, obtained key confidential details about upcoming decisions by the Centers for Medicare and Medicaid Services (CMS) from his close friend and former colleague at the agency, Christopher Worrall.
According to the SEC’s complaint, Worrall serves as a health insurance specialist in the Center for Medicare and tipped Blaszczak about at least three pending CMS decisions that affected the amount of money that companies receive from Medicare to provide services or products related to cancer treatments or kidney dialysis.
Blaszczak, 41, allegedly tipped two analysts at a hedge fund advisory firm that paid him as a consultant.
The analysts, Theodore Huber and Jordan Fogel, allegedly used the nonpublic information to recommend that the firm trade in the stocks of four health care companies whose stock prices would likely be affected by the decisions once CMS announced them publicly.
The alleged scheme resulted in more than $3.9 million in illicit profits.
“As alleged in our complaint, a federal employee breached his duty to protect confidential information by tipping a political consultant who then passed along those illegal tips,” said Stephanie Avakian, acting director of the SEC enforcement unit.
“There’s no place on Wall Street or in our government for such blatant misuse of highly confidential information.”
According to the SEC’s complaint, Blaszczak’s firms were paid at least $193,000 in a 19-month period by the hedge fund where the analysts worked.
“We remain committed to using all resources available to detect sophisticated schemes and stop those who try to create a revenue stream by tipping or trading on material, nonpublic information,” said Robert A. Cohen, Co-Chief of the SEC market abuse unit.
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