Whistle-Blowers Should Fear Insider-Trade Ruling, Defendants Say

Whistle-Blowers Should Fear Insider-Trade Ruling, Defendants Say

(Bloomberg) -- Two former Deerfield Management Co. partners convicted of insider trading with secret government information asked a U.S. appeals court to reconsider a ruling they claim threatens whistleblowers and good-government advocates who disclose wrongdoing by officials.

Robert Olan and Theodore Huber, who traded health-industry stocks on the tips they got about Medicare reimbursement rates, on Monday asked the full federal appeals court in Manhattan to reconsider an earlier ruling by a three-judge panel, citing the “extraordinary consequences” if it’s not reversed.

Olan and Huber want a review of a Dec. 30 decision by the panel, which ruled 2-1 that confidential information about future regulatory moves is property that can be the subject of a prosecution when it’s stolen and used to profit in the stock market.

The panel also made such prosecutions easier by concluding that it is no longer necessary to prove inside traders know that leakers of secret information did so in exchange for a “personal benefit,” such as cash. That requirement had been part of insider-trading law for four decades.

Olan and Huber argued the court’s ruling, which upheld their insider-trading convictions along with those of consultant David Blaszczak and tipster Christopher Worrall, threatens those who publicize internal government deliberations to expose wrongdoing.

Blaszczak and Worrall filed papers Monday asking the full court to throw out their convictions, claiming there wasn’t enough trial evidence against them. They also agreed with the broader arguments made by Olan and Huber in their filing.

The Manhattan-based appeals court is one level below the U.S. Supreme Court and hears cases from New York, Connecticut and Vermont. As a consequence, its decisions affect most insider-trading and other criminal cases targeting Wall Street.

2018 Convictions

The four men were convicted in May 2018 after a trial in Manhattan. Blaszczak received a one-year jail term. Worrall was sentenced to 20 months, and Olan and Huber each got three years.

Deerfield, which paid Blaszczak about $1 million in fees, used the information from him to make more than $3.5 million in profit, prosecutors said. The firm agreed in 2017 to pay $4.6 million to settle U.S. Securities and Exchange Commission claims that it failed to properly supervise employees, without admitting or denying the allegations.

What made the Blaszczak case different from most insider-trading prosecutions is that it revolved around government rather than corporate secrets. Blaszczak, the one-time “King of Political Intelligence,” was a former Medicare official who passed along tips he got from Worrall, his friend at the agency.

The case is U.S. V. Blaszczak, 18-2825, U.S. Court of Appeals for the Second Circuit (Manhattan).

To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at

To contact the editors responsible for this story: David Glovin at, Steve Stroth

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