Theodore Huber, a hedge fund partner from Westport, was among four people arrested May 24 for allegedly participating in an insider trading scheme, which prosecutors said converted government secrets into hedge fund profits.
Huber was arrested on conspiracy, securities fraud and other charges contained in an indictment unsealed in Manhattan federal court, the U.S. Attorney’s Office for the Southern District of New York said. Huber is a partner and analyst at Deerfield Management Co., a health care-focused hedge fund in New York, as is Robert Olan, who was also arrested.
The other two defendants are David Blaszczak, a political intelligence consultant, and Christopher Worrall, a government employee at the Centers for Medicare and Medicaid Services.
Another hedge fund employee, Jordan Fogel, pleaded guilty on May 19 and is cooperating with investigators in the case against the other four.
Acting U.S. Attorney Joon H. Kim said the defendants used “highly sensitive and confidential information” from the CMS division of the U.S. Department of Health and Human Services to enable the three hedge fund employees to make over $3.5 million illegally for their company from 2012 through 2014. The Securities and Exchange Commission said the profits reached $3.9 million.
Prosecutors said that Blaszczak was a consultant at several Washington, D.C.-based firms that in return for a fee provide “so-called” political intelligence, such as analysis about how changes in government reimbursement rates would affect publicly traded healthcare-related companies. Before he became a consultant, Blaszczak worked as a special assistant to the CMS administrator, according to the indictment.
Blaszczak remained friends with CMS’ Worrall following his exit from the company, with the latter feeding him secrets which Blaszczak then fed to the hedge fund employees.
In a statement, Huber’s attorney Barry Berke said: “At all times, his research was based on detailed and rigorous analysis as well as the type of information regularly and properly relied upon by institutional investors in evaluating health care and medical companies …. it will be shown that this prosecution is an ill-advised attempt to transform entirely innocent research and trading into a crime.”
If convicted, Huber faces up to 25 years in prison.