Aug 21 (Reuters) - Hedge fund advisory firm Deerfield Management Co has agreed to pay $4.6 million to settle claims by U.S. securities regulators that it failed to maintain policies to prevent misuse of inside information, about three months after two of its partners were hit with criminal insider trading charges.
The New York-based firm did not admit or deny wrongdoing as part of the agreement, the U.S. Securities and Exchange Commission said on Monday in announcing the settlement.
“We are pleased to have resolve this matter,” Deerfield spokesman Jonathan Gasthalter said.
The SEC’s charges are related to a criminal insider trading case filed in May against four people, including Rob Olan and Ted Huber, who were mostly recently partners at Deerfield. They are no longer listed on the firm’s website.
U.S. prosecutors in Manhattan charged Olan and Huber with trading on leaks from within a federal healthcare agency. Also charged were political consultant David Blaszczak, founder of Precipio Health Strategies, and Christopher Worrall, most recently an employee of the U.S. Centers for Medicare and Medicaid Services (CMS).
A former Deerfield member who was also charged, Jordan Fogel, previously pleaded guilty.
Prosecutors said that from 2012 to 2014, Olan, Huber and Fogel schemed to get confidential information about CMS’s internal decision-making from Blaszczak, a former CMS employee. Blaszczak in turn got the information from his former colleague and “close friend” Worrall, prosecutors said.
CMS, part of the Department of Health and Human Services, oversees government health insurance programs. The confidential information included advance notice about rules cutting reimbursement rates for radiation cancer treatment and dialysis, allowing Deerfield to make bets in the stock market on healthcare companies that would be affected by the new reimbursement rates.
The scheme yielded $3.9 million in profits, according to the SEC.
In its separate civil case against Deerfield, the SEC claimed that the firm did not adequately review the policies of the outside research firms it worked with. When it came to its own policies, Deerfield left its employees to police themselves, the agency said. (Reporting by Brendan Pierson in New York; Editing by Leslie Adler)