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A Partisan Appeals Court Has Reversed the Convictions of Four People for Insider Trading

On Tuesday, an appeals court ruled 5-4 to overturn the insider trading convictions of four men, including a former government employee turned consultant, prompting a strong dissent from a judge who feared that the ruling could encourage insiders to sell confidential government information to the highest bidder.

The ruling came from the 2nd U.S. Circuit Court of Appeals in the case of Washington consultant David Blaszczak, who was accused of selling government secrets to a hedge fund.

Divided appeals court rejects 4 insider trading convictions

A jury in 2018 convicted Blaszczak and three hedge fund employees for their roles in a plan that, according to the prosecution, allowed the employees to illegally earn more than $3.5 million for their company between 2012 and 2014. According to the SEC, the company made $3.9 million in profit.

Former employee of the Centers for Medicare & Medicaid Services (part of the U.S. Department of Health & Human Services) turned consultant Blaszczak has been in the field of health policy since 1999.

According to the SEC and prosecutors, he bragged about knowing when and what changes will be made to government payment laws affecting publicly traded health care related companies.

On Tuesday, a panel of judges from the 2nd Circuit Court of Appeals voted 2 to 1 to reverse their earlier affirmation of the convictions of officials in the administration of former New Jersey Gov. Chris Christie. This came after the Supreme Court urged the panel to reconsider its reversal of the convictions.

The Supreme Court ruled in that case that the officials’ politically motivated behaviour in causing significant traffic gridlock for several days at the New Jersey entrance to the George Washington Bridge connecting New Jersey and Manhattan was not a crime because they did not intend to deprive the bridge’s owners of money or property.

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Legal counsel for Blaszczak claimed that their client’s knowledge did not qualify as property or an item of value for purposes of federal fraud and insider trading statutes. They won their most recent appeal because the prosecution agreed with their reasoning on most points.

The 2nd Circuit Court of Appeals agreed to reverse the majority of convictions and vacated convictions on two other counts, leaving the decision of whether or not to retry those counts to a lower court.

Circuit Judge Richard A. Sullivan disagreed with the majority and strongly criticised the decision. He claimed it “effectively permits sophisticated insiders to leverage their access to confidential government information and sell it to the highest bidders,” specifically, hedge funds that made millions shorting the stocks of public companies affected by CMS’s regulations after obtaining the confidential information.

Divided appeals court rejects 4 insider trading convictions

 

In addition, he claimed that the ruling “threatens to upend decades of settled precedent concerning frauds premised on the theft of intangible property and suggests — in what amounts to dicta — a curious and troubling rule of deference that would require federal courts to acquiesce whenever the government announces a new, post-conviction statutory interpretation.”

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Sullivan expressed his disagreement with the majority opinion that the government’s possession of private information did not constitute property.

Attorney David Patton, who represented Blaszczak, declined to provide an interview. A representative for the prosecution likewise declined to provide any additional information. The San Diego Union-Tribune was the first to publish this story.

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Marissa Figgs
I write picture books, for middle grade, and young adults, some of which have won prizes, been filmed, or become bestsellers. I've ghostwritten for Pixar and developed teen work for Alloy Entertainment. I think heartfelt writing is the finest. It doesn't have to be personal, but it must be visceral. You want them riveted from the first word, page, or sentence, no matter how painful or unpleasant, and that's my expertise.
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