Hedge Fund Executives Deny Charges in Government Leak Case

(Bloomberg) -- Two hedge fund executives and a Washington consultant accused of leaking secret tips about changes in U.S. health-care policy pleaded not guilty to federal insider-trading charges on Wednesday.

The Deerfield Management partners, Theodore Huber and Robert Olan, along with consultant David Blaszczak appeared before U.S. District Judge Denise Cote in Manhattan federal court to assert their innocence in a case that takes aim at the booming political intelligence industry in Washington.

In an indictment handed down last week, prosecutors said Blaszczak used his personal relationships with former colleagues at the U.S. Centers for Medicare and Medicaid Services to get advance knowledge of pending decisions. He then passed the tips to clients at Deerfield who used the information to shape trading strategy, the U.S. said. Christopher Worrall, an alleged government leaker, also pleaded not guilty.

Cole used the brief hearing to schedule pre-trial information exchanges and legal motions. The four defendants didn't further address the charges.

The case unveils the relationship between consultants, who source secret information from networks of government contacts, and the New York hedge funds who benefit in exchange for lucrative fees. The information for sale, which includes pending decisions on reimbursement rates for specific medical treatments, can swing markets and generate profits for firms on the right side of the trade.

A third Deerfield executive, analyst Jordan Fogel, left the firm last year and secretly pleaded guilty earlier this month. Huber and Olan are on leave from Deerfield, a person familiar with the matter has said. The hedge fund is cooperating with the government's investigation, a spokesman said.

To contact the reporter on this story: Christian Berthelsen in New York at cberthelsen1@bloomberg.net.

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Sophia Pearson