US Gov’t Charges Insider Trading Against Providers & Users of Political Intelligence


Last month, the U.S. Department of Justice and the SEC brought indictments against political intelligence analyst David Blaszczak, a current CMS executive, and two hedge fund analysts for allegedly using confidential government information to generate $3.9 mln in illicit profits.

Background of the Case

On May 24, 2017, the United States Attorney’s Office for the Southern District of New York and the Securities and Exchange Commission (SEC) announced their latest criminal and civil insider trading cases by charging that nonpublic “political intelligence” was used, in violation of the Stop Trading on Congressional Knowledge Act (STOCK Act), for illicit personal gain.

The government’s indictment and the SEC’s civil complaint charge that an insider at the federal Centers for Medicare and Medicaid Services (CMS) tipped a former CMS colleague, current “political intelligence” consultant, and “friend,” who in turn tipped two hedge fund health care analysts, who illegally used this information to generated $3.9 million in profits.

David Blaszczak, a former CMS employee and political intelligence consultant, reportedly met  Christopher Worrall, a long-time executive CMS staff member, in 2001 when they both worked for the federal agency.  Blaszczak left CMS in 2005 and in 2011 he introduced his friend Worrall to a political intelligence contact who offered him a lucrative job.  According to the SEC complaint, Worrall declined the offer but he used it to leverage a $10,000 raise from CMS.

In 2012 and 2013, Blaszczak met with Worrall a number of times, during which Worrall allegedly shared secret inside CMS information with Blaszczak.  The government contends that on three separate occasions Blaszczak passed along this inside information to analysts Ted Huber and Jordan Fogel, and partner Robert Olan of Deerfield Management, a healthcare oriented hedge fund.  The three are accused of turning this insider information into roughly $3.9 mln in profits.  Blaszczak allegedly made $263,000 in consulting fees and bonuses from his engagement with Deerfield.

According to the government’s complaint, Blaszczak repeatedly bragged about his access to confidential CMS information and, in one email criticized a competitor’s different predictions, noting that the analyst “doesn’t know anyone at the CMS. His guesses are just wild random guesses.” Blaszczak also specifically mentioned Worrall and his access to certain CMS databases in communications with his clients.

Our Take

The facts of the case against Blaszczak seem to be a textbook insider trading charge, particularly given some of the damning email evidence collected by the government showing that he knew that the information he collected from Worrall and passed on to Deerfield was material nonpublic information.

However, what is unique about this case is that the charge against Worrall is based primarily on a violation of the Stop Trading on Congressional Knowledge Act (STOCK Act).  Worrall, as an employee of the CMS and an executive branch employee, is subject to the STOCK Act.  In addition, Worrall was subject to CMS’s internal nondisclosure policy, which specifically prohibits him from disclosing “non-public, confidential, privileged, or proprietary” information unless authorized by law.

Another major difference about this case is the SEC is not arguing that Huber and Fogel knew whether Worrall received any potential “benefit” for providing the secret CMS tips.  Instead, the SEC alleged that Huber and Ford “should have known”, or “consciously avoided knowing” that Blaszczak was providing them with confidential CMS information based on its accuracy and the fact that they were aware he was a former CMS employee who remained friends with existing CMS staff.

Clearly, the SEC is hoping that the STOCK Act and the Supreme Court’s Salman decision which widened the definition of what can be seen as a “benefit” to a tipper, will give the Feds more latitude to bring aggressive insider trading cases against government employees, political intelligence consultants, and the hedge funds that use them.  This development obviously creates increased risk for political intelligence firms and their hedge fund clients.



About Author

Mike Mayhew is one of the leading experts on the investment research industry. In addition to founding Integrity Research, Mike is on the board of directors of Investorside Research Association, the non-profit trade association for the independent research industry, and a frequent speaker on research industry trends and developments. Mike has over thirty years of research industry experience. Email:

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