Headlines that Matter for Companies and Executives in Regulated Industries
DOJ Enters Into DPAs with Former Deerfield Traders and CMS Consultant
On July 24, 2023, the US Department of Justice (DOJ) entered into deferred prosecution agreements with Theodore Huber and Robert Olan, former traders of Deerfield Management Co. LP, and David Blaszczak, a former consultant for hedge funds and former employee at the Centers for Medicare and Medicaid Services (CMS) and dismissed remaining insider trading charges.
In 2018, a jury convicted all three defendants of, inter alia, conspiracy to convert US property, securities fraud, and to defraud the United States; conspiracy to commit wire fraud and securities fraud; conversion of US property; wire fraud; and securities fraud. According to the original indictment, Huber, Olan, and Blaszczak were alleged to have participated in a scheme to obtain confidential information from CMS, which they allegedly used to execute profitable trades at Deerfield. Following the US Supreme Court’s decision in Kelly v. United States, 140 S. Ct. 1565 (2020), on December 27, 2022, the Second Circuit overturned the defendants’ convictions.
Under the deferred prosecution agreements, Huber, Olan, and Blaszczak must refrain from violating laws, associate only with “law-abiding persons,” and report to their supervising US Pretrial Services Officers. Moreover, the DOJ agreed to defer the retrials of all three defendants during the term of their good behavior and satisfactory compliance with the agreement for a period of three months after the defendants signed the agreements.
The cases are U.S. v. Blaszczak, U.S. v. Olan, and U.S. v. Huber, Case No. 17 CR 00357.
Physicians Settle Kickback Allegations Concerning Laboratory Testing
On July 20, 2023, the DOJ announced that two Missouri and Texas physicians and their medical practices agreed to pay $526,610 to settle allegations that they violated the False Claims Act (FCA).
According to the DOJ, the Missouri and Texas physicians, Imran Chisti and Shamim Justin Badiyan, along with their practices, allegedly received thousands of dollars in payments in return for referring patients for laboratory tests. The DOJ further alleges that the defendants received these funds through purported third-party management service organizations in return for ordering laboratory tests from laboratories located in Florida, New Jersey, and Texas.
The DOJ press release can be found here.
Investment Advisor Agrees to Pay $1 million for SPAC-Related Conflicts of Interest
On July 20, 2023, the US Securities and Exchange Commission (SEC) announced that it settled charges against investment advisor, Monroe Capital Management Advisors, LLC, for failing to disclose conflicts of interest relating to its ownership of sponsors of certain special purpose acquisition companies (SPACs), into which Monroe Capital had advised its clients to invest.
According to the order, from June 2018 through February 2021, personnel of Monroe Capital were involved in the formation and/or became members of the sponsor of three SPACs and acquired ownership interests in the sponsors. The SEC alleges that Monroe Capital caused private funds that it advised to participate in private investment in public equity (PIPE) transactions related to the SPACs’ businesses in the amounts of $25 million, $7.5 million, and $5 million. Additionally, Monroe Capital also allegedly caused its advisory clients to purchase approximately $15 million of common stock in one of the sponsors prior to the closing of its business combination.
The SEC alleges, in violation of the Advisers Act and the Exchange Act, Monroe Capital failed to disclose these conflicts of interest to the private funds and failed to timely file amended reports concerning changes to its affiliates’ beneficial ownership of the common stock of a public company formed as a result of a SPAC business combination. As a part of the settlement, Monroe Capital was ordered to pay $1 million to the SEC.
The SEC press release can be found here and the SEC order can be found here.
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