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United States v. Blaszczak

United States Court of Appeals for the Second Circuit

November 21, 2019, Argued; December 30, 2019, Decided

Docket Nos. 18-2811, 18-2825, 18-2867, 18-2878

Opinion

 [*26]  Richard J. Sullivan, Circuit Judge:

These consolidated appeals require us to consider whether the federal wire fraud, securities fraud, and conversion statutes, codified at 18 U.S.C. §§ 1343, 1348, and 641, respectively, reach misappropriation of a government agency's confidential nonpublic information relating to its contemplated rules. Defendants David Blaszczak, Theodore Huber, Robert Olan, and Christopher Worrall were charged with violating these statutes — and with engaging in securities fraud in violation of Section 10(b) of the Securities and Exchange Act, 15 U.S.C. § 78j(b), and SEC Rule 10b-5 ("Title 15 securities fraud") — by misappropriating confidential nonpublic information from the Centers for Medicare & Medicaid Services ("CMS"). The indictment principally alleged that CMS employees, including Worrall, disclosed the agency's confidential information to Blaszczak, a "political intelligence" consultant for hedge [**4]  funds, who in turn tipped the information to Huber and Olan, employees of the healthcare-focused hedge fund Deerfield Management Company, L.P. ("Deerfield"), which traded on it. After a one-month trial before the United States District Court for the Southern District of New York (Kaplan, J.), a jury found Defendants guilty of wire fraud, conversion, and, with the exception of Worrall, Title 18 securities fraud and conspiracy. The jury acquitted Defendants on all counts alleging Title 15 securities fraud.

Defendants now challenge their convictions on various grounds. For the reasons set forth below, we reject these challenges. In doing so, we hold, inter alia, that (1) confidential government information such as the CMS information at issue here may constitute "property" in the hands of the government for purposes of the wire fraud and Title 18 securities fraud statutes, and (2) the "personal-benefit" test established in Dirks v. SEC, 463 U.S. 646, 103 S. Ct. 3255, 77 L. Ed. 2d 911 (1983), does not apply to these Title 18 fraud statutes. Because we also discern no prejudicial error with respect to the remaining issues raised on appeal, we affirm the judgments of the district court.

I. Background

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947 F.3d 19 *; 2019 U.S. App. LEXIS 38662 **; Fed. Sec. L. Rep. (CCH) P100,724; 2019 WL 7289753

UNITED STATES OF AMERICA, Appellee, v. DAVID BLASZCZAK, THEODORE HUBER, ROBERT OLAN, CHRISTOPHER WORRALL, Defendants-Appellants.

Prior History: Defendants David Blaszczak, Theodore Huber, Robert Olan, and Christopher Worrall appeal from judgments of conviction following a jury trial before the United States District Court for the Southern District of New York (Kaplan, Judge) for wire fraud, Title 18 securities fraud, conversion of U.S. property, and conspiracy, arising from the misappropriation of confidential information from the Centers for Medicare & Medicaid Services. On appeal, Defendants argue that the evidence at trial was insufficient in various respects, the district court committed instructional and evidentiary errors, and there was prejudicial misjoinder for two counts in which Blaszczak alone was charged. We reject each of these challenges. In doing so, we hold, inter alia, that (1) confidential government information may constitute "property" for purposes of the wire fraud and Title 18 securities fraud statutes, and (2) the "personal-benefit" test announced in Dirks v. SEC, 463 U.S. 646, 103 S. Ct. 3255, 77 L. Ed. 2d 911 (1983) [**1] , does not apply to those Title 18 fraud statutes. Because we also discern no prejudicial error with respect to the other issues presented on appeal, we AFFIRM the judgments of the district court.

United States v. Blaszczak, 2018 U.S. Dist. LEXIS 41009 (S.D.N.Y., Mar. 12, 2018)

CORE TERMS

confidential, securities fraud, Counts, confidential information, predecisional, district court, regulation, wire fraud, convictions, conversion, nonpublic, Defendants', insider, misappropriation, disclosure, conspiracy, embezzlement, personal-benefit, purposes, convert, thing of value, consultant, Indictment, announced, charges, predictions, fraudulent, quotation, grounds, marks

Criminal Law & Procedure, Appeals, Standards of Review, De Novo Review, Governments, Legislation, Interpretation, Trials, Jury Instructions, Commencement of Criminal Proceedings, Accusatory Instruments, Joinder & Severance, De Novo Review, Sufficiency of Evidence, Evidence, Burdens of Proof, Allocation, Proof Beyond Reasonable Doubt, Weight & Sufficiency, Abuse of Discretion, Evidence, Admissibility, Procedural Matters, Rulings on Evidence, Business & Corporate Compliance, Criminal Offenses, Fraud, Securities Fraud, False Pretenses, Fraud Against the Government, Mail Fraud, Trade Secrets Law, Protected Information, Fraud, Wire Fraud, Securities Fraud, Elements, Prosecution, Theft & Related Offenses, Embezzlement, Embezzlement, Securities, Theft & Related Offenses, Courts, Judicial Precedent, Vagueness, Jury Instructions, Particular Instructions, Juries & Jurors, Province of Court & Jury, Factual Issues, Joinder & Severance, Joinder of Defendants, Defective Joinder & Severance, Misjoinder