A one-time "King of Political Intelligence" got a year in prison for insider trading -- a sentence that sends a warning to Washington consultants that profiting from government secrets can be as risky as trading on confidential company information.
David Blaszczak, 42, a Washington consultant who was convicted of giving two hedge funds advance word on changes to Medicare reimbursement rates, was also ordered to forfeit $727,500 and to spend another 12 months under house arrest. A federal jury in May found that he provided the clients with tips he picked up from ex-colleagues still in the government.
"Blaszczak was unapologetic and giddy about what he was doing," U.S. District Judge Lewis Kaplan said at Thursday’s sentencing in Manhattan.
Convicted with Blaszczak were his friend and source inside the government, Christopher Worrall, and two partners at Deerfield Management, Robert Olan and Theodore Huber. Worrall was sentenced Thursday to 20 months, and Olan and Huber each got three years and were ordered to pay more than $1.3 million. Kaplan allowed all four to remain free pending appeal.
Blaszczak worked as a consultant after leaving the federal Centers for Medicare and Medicaid Services. Jurors found that, from 2009 to 2014, he passed tips to his clients about confidential plans to change government reimbursement rates for cancer and kidney disease treatments.
Although the central figure in the case, Blaszczak got the lightest sentence because his wife is suffering from a degenerative eye condition and has no one else to rely on for help.
"The wreckage that a long period of incarceration would wreak on her and your son is terrifying to me," he told Blaszczak. "You’re the undeserving beneficiary" of that.
The monthlong trial opened to public scrutiny the political intelligence business, where former government employees often leverage relationships with ex-colleagues to deliver their investor clients a heads-up on planned actions that could move markets.
The trial cast a harsh light on Deerfield. The government’s star witness, Jordan Fogel, a former Deerfield partner who pleaded guilty in a bid for leniency, testified that the firm used Blaszczak to gain an illegal “edge,” allowing it to trade ahead of government announcements. Deerfield, which paid Blaszczak almost $1 million in fees, used the information to make more than $7 million in profit, according to prosecutors.
"Blaszczak was at the center of a brazen scheme that combined public corruption with securities fraud, and was part of a corrupt tipping chain that ran from Washington to Wall Street," prosecutors said in court papers, urging Kaplan to give Blaszczak more than five years in prison.