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1 1 (April 26, 2023)

handle is hein.crs/govelkg0001 and id is 1 raw text is: Con gressionaI ~ Research Service Second Circuit Applies Supreme Court Decision to Limit the Reach of Federal Fraud Statutes April 26, 2023 In December 2022 the United States Court of Appeals for the Second Circuit issued its second decision in United States v. Blaszczak (Blaszczak H), overturning convictions for wire fraud, securities fraud, and conversion of government property. These convictions arose from an insider trading scheme in which an intermediary obtained information from his government contacts regarding planned actions of a federal agency and conveyed that information to health-care-focused hedge funds. The Second Circuit had originally upheld those convictions in a 2019 decision (Blaszczak 1), but the Supreme Court vacated that judgment and returned the case to the Second Circuit for reconsideration in light of the Supreme Court's intervening decision in Kelly v. United States. In Kelly, the Supreme Court had narrowly construed the meaning of government property under the federal statutes criminalizing wire-fraud and fraud on a federally funded program. On remand in Blaszczak II, the Second Circuit applied Kelly to hold that the confidential, predecisional regulatory information from the Centers for Medicare and Medicaid Services (CMS) conveyed during the insider trading scheme did not constitute government property under federal fraud statutes. This ruling has implications for the federal government's ability to prosecute insider trading cases involving government information. There is no federal statute that specifically targets insider trading, and Blaszczak narrowed the scope of several statutes that prosecutors within the Second Circuit can use to target such activity. The Sidebar recounts chronologically the facts and holdings in the Blaszczak I, Kelly, and Blaszczak II decisions. The Sidebar then offers relevant considerations for Congress. Blaszczak I The facts at issue in Blaszczak concern two insider trading schemes centered on confidential nonpublic information from CMS, an agency within the U.S. Department of Health and Human Services that administers Medicare and Medicaid. The first scheme involved four defendants: a consultant for hedge funds and former CMS employee, partners at the health-care-focused hedge fund Deerfield Management Company, L.P. (Deerfield), and a Congressional Research Service https://crsreports.congress.gov LSB10955 CRS Legal Sidebar Prepared for Members and Committees of Congress

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