Feds: CMS insider’s ‘secret sauce’ drove NY hedge fund’s healthcare bets

Federal prosecutors yesterday reportedly accused a political consultant of using his contact at the Centers for Medicare & Medicaid Services as the “secret sauce” in a $7 million insider trading scheme with a well-known healthcare hedge fund.

Consultant David Blaszczak, founder of Precipio Health Strategies and the one-time colleague at CMS of Christopher Worrall, pleaded not guilty last June to charges that Worrall used his position in the CMS director’s office for access to advance notice of reimbursement rate changes. Traders at Deerfield Management, Ted Huber and Rob Olan, allegedly used the inside dope to make moves on healthcare stocks affected by the changes for radiation treatments and dialysis. Another Deerfield trader, Jordan Fogel, pleaded guilty in May 2017.

The trades allegedly involved radiosurgery companies Accuray (NSDQ:ARAY), Varian Medical (NYSE:VAR) and Elekta (STO:EKTA B) and dialysis providers DaVita Healthcare(NYSE:DVA) and Fresenius (NYSE:FMS), prosecutors allege.

At the trial’s opening yesterday in New York City, assistant U.S. attorney Joshua Naftalis said Blaszczak’s “network of friends was his secret sauce,” Deerfield was “in it for the money” and Worrall wanted to parlay his tips into a private-sector job, according to Reuters, alleging an “unbroken criminal chain that went from Washington to New York.”

Blaszczak’s lawyer, David Patton, countered that there are “zero allegations” that anyone was paid for tips and “there was no secret mole inside” CMS, where information is “constantly” shared outside the agency.

“If New York is the town that never sleeps, D.C. is the city that never shuts up,” Patton said, the news service reported.

Worrall lawyer John Nathanson added that much of the information his client is accused of leaking was already public knowledge and denied any quid pro quo, Reuters reported.

“The government’s theory is he threw away 18 years of hard work,” Nathanson said. “Yeah, he got opportunities. He didn’t take them.”

Huber attorney Barry Berke told jurors that Fogel “abused his colleagues behind their back” and would “continue to abuse the truth,” according to the wire report.

Deerfield agreed last year to pay $4.6 million to settle a related U.S. Securities & Exchange Commission case, without admitting any wrongdoing, Reuters reported.

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