A P P E N D I X U.S. v. BLASZCZAK 19 Cite as 947 F.3d 19 (2nd Cir. 2019)

dinance preempted by Me. Rev. Stat. tit. Southern District of New York, Lewis A. 38, § 556 of Maine’s Coastal Conveyance Kaplan, Senior District Judge, of wire Act? fraud, securities fraud, conversion of U.S. (3) Independent of Me. Rev. Stat. tit. 38, property, and conspiracy arising from mis- § 556, is there any basis for finding that appropriation of confidential information Maine’s Coastal Conveyance Act impli- from Centers for Medicare and Medicaid edly preempts the City of South Port- Services (CMS). Defendants appealed. land’s Clear Skies Ordinance? Holdings: The Court of Appeals, Sullivan, We would welcome further guidance Circuit Judge, held that: from the Law Court on any other relevant aspect of Maine law that it believes would (1) agency’s proprietary right to exclude aid in the proper resolution of the issues and well-recognized economic interests before us. were sufficient for its confidential in- formation regarding contemplated reg- The Clerk of this Court is directed to ulatory action to be ‘‘property’’; forward to the Maine Supreme Judicial Court, under the official seal of this Court, (2) defendant did not have to receive per- a copy of the certified questions, along sonal benefit to be convicted under fed- with the merits briefs and appendices filed eral criminal statute governing securi- by the parties and the State of Maine as ties and wire fraud statute; amici, as well as the supplemental briefs (3) interference with agency ownership of filed by the parties and the State of Maine confidential information regarding pre- pursuant to this Court’s order dated Sep- decisional reimbursement rates was tember 23, 2019. complete upon unauthorized disclosure; (4) interference with agency’s confidential , information regarding predecisional re- imbursement rates was serious;

(5) CMS predecisional reimbursement UNITED STATES of America, rates was ‘‘thing of value’’ under Appellee, criminal conversion statute; v. (6) ‘‘conscious avoidance’’ instruction was David BLASZCZAK, Theodore Huber, warranted; and Robert Olan, Christopher Worrall, (7) joinder was permissible for distinct Defendants-Appellants. schemes of misappropriation and in- Docket Nos. 18-2811 sider trading of confidential govern- 18-2825 ment information concerning health- 18-2867 care rules. 18-2878 Affirmed. August Term 2019 Kearse, Senior Circuit Judge, filed dissent- United States Court of Appeals, ing opinion. Second Circuit. Argued: November 21, 2019 O Decided: December 30, 2019 1. Criminal Law 1139 Background: Defendants were convicted The Court of Appeals reviews de novo in the United States District Court for the questions of statutory interpretation, chal-

Pet. App. 01 20 947 FEDERAL REPORTER, 3d SERIES

lenges to the district court’s jury instruc- property for purposes of securities fraud. tions, and the propriety of joinder. 18 U.S.C.A. §§ 1343, 1348.

2. Criminal Law O1139, 1144.13(3), 6. Criminal Law O1159.2(1) 1159.2(7) A reviewing court’s limited determina- Sufficiency of the evidence is reviewed tion on review of sufficiency of the evi- de novo, recognizing that a defendant rais- dence does not rest on how the jury was ing such a challenge bears a heavy burden instructed. because a reviewing court must consider 7. Securities Regulation O193 the evidence in the light most favorable to the prosecution and uphold the conviction Telecommunications O1014(7) if any rational trier of fact could have Under the wire fraud and securities found the essential elements of the crime fraud statutes, the word ‘‘property’’ is con- beyond a reasonable doubt. strued in accordance with its ordinary meaning: ‘‘something of value’’ in the pos- 3. Criminal Law O1153.1 session of the property holder. A district court’s evidentiary rulings See publication Words and Phrases are reviewed for abuse of discretion. for other judicial constructions and definitions. 4. Securities Regulation O193 O Telecommunications O1014(7) 8. Telecommunications 1014(7) Agency’s proprietary right to exclude On a wire fraud claim where the fraud and well-recognized economic interests victim is a government agency and the were sufficient for its confidential informa- claimed property is confidential informa- tion regarding contemplated regulatory ac- tion regarding contemplated regulatory ac- tion to be ‘‘property’’ under federal wire tion, monetary loss generally may be a fraud and securities fraud statutes, even if useful tool for distinguishing a govern- agency did not suffer actual monetary loss ment’s property interests from its ‘‘purely from defendants’ misappropriation. 18 regulatory’’ interests, but it is not re- U.S.C.A. §§ 1343, 1348. quired. 18 U.S.C.A. §§ 1343. See publication Words and Phrases 9. Telecommunications O1014(7) for other judicial constructions and definitions. Exclusivity is an important character- istic when determining what is ‘‘property’’ 5. Criminal Law O1044.1(7) in the context of a wire fraud claim where Defendants’ motion for judgment of the fraud victim is a government agency acquittal on ground that evidence at trial and the claimed property is confidential was insufficient to establish that agency’s information regarding contemplated regu- information was ‘‘property’’ in hands of latory action. 18 U.S.C.A. § 1343. agency was sufficient to preserve argu- 10. Securities Regulation O193 ment for consideration on appeal that O confidential government information was Telecommunications 1014(7) not ‘‘property’’ under federal wire fraud General, confidential government in- and securities fraud statutes, although de- formation may constitute government fendants did not object to district court’s ‘‘property’’ under the wire fraud and secu- instruction that confidential government rities fraud statutes. 18 U.S.C.A. §§ 1343, information could be considered to be 1348.

Pet. App. 02 U.S. v. BLASZCZAK 21 Cite as 947 F.3d 19 (2nd Cir. 2019)

11. Securities Regulation O193 care by another. 18 U.S.C.A. §§ 1343, An insider may not be convicted of 1348(1), 1348(2). securities fraud unless the government See publication Words and Phrases proves that he breached a duty of trust for other judicial constructions and definitions. and confidence by disclosing material, non- public information in exchange for a ‘‘per- 16. Securities Regulation O193 sonal benefit.’’ Securities Act of 1933, Telecommunications O1014(8) § 17(a), 15 U.S.C.A. § 77q(a); Securities Under the federal wire fraud statute Exchange Act of 1934, § 10(b), 15 U.S.C.A. and the general criminal statute for securi- § 78j(b). ties, the undisclosed misappropriation of 12. Securities Regulation O193 confidential information, in breach of a fi- duciary or similar duty of trust and confi- A tippee may not be convicted of fed- dence, constitutes fraud akin to embezzle- eral securities fraud unless he utilized the ment. 18 U.S.C.A. §§ 1343, 1348(1), inside information knowing that it had 1348(2). been obtained in breach of the insider’s duty. Securities Act of 1933, § 17(a), 15 17. Securities Regulation O193 U.S.C.A. § 77q(a); Securities Exchange Act The personal-benefit test, under which of 1934, § 10(b), 15 U.S.C.A. § 78j(b). an insider may not be convicted of securi- 13. Securities Regulation O193 ties fraud under the Securities Exchange Act unless the government proves that he Telecommunications O1014(8) breached a duty of trust and confidence by Defendant did not have to receive per- disclosing material, nonpublic information sonal benefit to be convicted under federal in exchange for a personal benefit, is a criminal statute governing securities and judge-made doctrine premised on the Ex- wire fraud statute. 18 U.S.C.A. §§ 1343, change Act’s statutory purpose. Securi- 1348. ties Exchange Act of 1934 § 10, 15 14. Securities Regulation O60.19, 193 U.S.C.A. § 78j(b). Telecommunications O1014(8) 18. Securities Regulation O193 Under the federal wire fraud statute, Telecommunications O1014(8) the general criminal statute for securities, In the context of embezzlement in vio- and the civil securities fraud statute, the lation of the federal wire fraud statute or term ‘‘defraud’’ encompasses ‘‘embezzle- the general criminal statute for securities, ment’’ or ‘‘misappropriation.’’ Securities there is no additional requirement that an Exchange Act of 1934 § 10, 15 U.S.C.A. insider breach a duty to the owner of the § 78j(b); 18 U.S.C.A. §§ 1343, 1348(1), property, since it is impossible for a person 1348(2); 17 C.F.R. § 240.10b-5(a). to embezzle the money of another without committing a fraud upon him. 18 U.S.C.A. 15. Securities Regulation O193 §§ 1343, 1348. Telecommunications O1014(8) O Under the federal wire fraud statute 19. Securities Regulation 60.28(5) and the general criminal statute for securi- The personal-benefit test for insider ties, the act of ‘‘embezzlement’’ is the trading depends entirely on the purpose of fraudulent appropriation to one’s own use the Securities Exchange Act; it is not of the money or goods entrusted to one’s grounded in the embezzlement theory of

Pet. App. 03 22 947 FEDERAL REPORTER, 3d SERIES

fraud. Securities Exchange Act of 1934 allowing for defendants’ conviction for § 10, 15 U.S.C.A. § 78j(b). conversion under federal criminal statute; even though agency was able to keep us- 20. Securities Regulation O193 ing that information after unauthorized The criminal statute addressing secu- disclosure, government had strong inter- rities fraud was intended to provide prose- est in maintaining confidentiality of that cutors with a different and broader en- information and adverse effects of disclo- forcement mechanism to address securities sure caused agency to function less effi- fraud than what previously had been pro- ciently. 18 U.S.C.A. § 641. vided in the civil securities fraud provi- O sions. Securities Exchange Act of 1934 25. Larceny 18 § 10, 15 U.S.C.A. § 78j(b); 18 U.S.C.A. In defendants’ trial on charge of con- § 1348. version, jury was free to consider ability of Centers for Medicare and Medicaid Ser- O 21. Larceny 18 vices (CMS) to use misappropriated infor- Interference with Centers for Medi- mation regarding predecisional reimburse- care and Medicaid Services (CMS) owner- ment rates and that CMS did not suffer ship of confidential information regarding any monetary loss, as well as strength of predecisional reimbursement rates was government’s interest in maintaining confi- complete upon unauthorized disclosure, al- dentiality, risk of harm to government’s lowing for defendants’ conviction for crimi- interests posed by unauthorized disclosure, nal conversion under federal law, even if and extent of unauthorized disclosure. 18 misappropriation did not ultimately affect U.S.C.A. § 641. rules subsequently announced by CMS. 26. Larceny O5 18 U.S.C.A. § 641. Centers for Medicare and Medicaid 22. Larceny O18 Services (CMS) predecisional reimburse- Although arguably a lesser quantum ment rates was ‘‘thing of value’’ under of interference might be required under criminal conversion statute. 18 U.S.C.A. the federal conversion statute, which was § 641. intended to broaden the scope of the com- See publication Words and Phrases mon-law crime, evidence sufficient to es- for other judicial constructions and definitions. tablish ‘‘serious interference’’ under the common law, at a minimum, would be suf- 27. Larceny O5 ficient to establish the requisite interfer- Confidential information can itself be ence required for conversion. 18 U.S.C.A. a ‘‘thing of value’’ under the criminal con- § 641. version statute. 18 U.S.C.A. § 641. See publication Words and Phrases 23. Larceny O18 for other judicial constructions and Federal criminal conversion extends definitions. broadly to the misuse or abuse of govern- 28. Constitutional Law O1132(49) ment property. 18 U.S.C.A. § 641. Larceny O2 24. Larceny O18 Federal criminal statute prohibiting Interference with Centers for Medi- conversion was not vague as applied to care and Medicaid Services (CMS) confi- defendants who were not employees of dential information regarding predeci- Centers for Medicare and Medicaid Ser- sional reimbursement rates was serious, vices (CMS) but knew that disclosure of

Pet. App. 04 U.S. v. BLASZCZAK 23 Cite as 947 F.3d 19 (2nd Cir. 2019)

confidential predecisional CMS informa- ously knew that disclosure of predecisional tion to them on reimbursement rates was CMS information on reimbursement rates without authority, even if their conduct he received was unauthorized and could was not prohibited by published rule or spawn interference with CMS’s processes, regulation. 18 U.S.C.A. § 641; 5 C.F.R. but he nevertheless intentionally proceed- § 2635.703(a). ed to appropriate such information to his own use by disclosing it to his hedge fund 29. Larceny O12 clients. 18 U.S.C.A. § 641; 5 C.F.R. Although the phrase ‘‘without authori- § 2635.703(a). ty’’ in the criminal conversion statute mod- O ifies only the words that follow it, ‘‘sells, 34. Conspiracy 48.2(2) conveys, or disposes,’’ not the words pre- Criminal Law O772(5) ceding it, ‘‘embezzles, steals, purloins, or Larceny O71(1) knowingly converts,’’ the ‘‘without authori- Securities Regulation O194 ty’’ requirement is implied by the defini- Telecommunications O1021 tion of conversion. 18 U.S.C.A. § 641. Rational juror could have found that, 30. Constitutional Law O975 even if defendants did not have actual knowledge that predictions of former Cen- Where a court is not dealing with ters for Medicare and Medicaid Services defendants’ exercise of a First Amendment (CMS) employee were based on confiden- freedom, the court should not search for tial CMS information that had been con- statutory vagueness that did not exist for verted, they at least were aware of high the defendants themselves. U.S. Const. probability of that fact and yet consciously Amend. 1. avoided confirming it, and therefore ‘‘con- 31. Constitutional Law O1130 scious avoidance’’ instruction was warrant- The existence of a published regula- ed in defendant’s trial on charges of wire tion proscribing disclosure is not the exclu- fraud, securities fraud, conversion of U.S. sive method of preventing vagueness. property, and conspiracy arising from mis- appropriation of confidential information O 32. Larceny 57 from CMS, where evidence at trial estab- Evidence at trial was sufficient to es- lished that defendants sought out services tablish defendants’ knowledge that their of former CMS employee precisely so they receipt of Centers for Medicare and could trade on information that other ana- Medicaid Services (CMS) confidential in- lysts and consultants did not possess and formation regarding predecisional reim- they specifically discussed fact that disclo- bursement rates was serious interference, sure of CMS confidential predecisional in- allowing for defendants’ conviction for formation could harm agency’s regulatory conversion under federal criminal statute, process. 18 U.S.C.A. §§ 641, 1343, 1348; 5 where co-conspirator discussed impact on C.F.R. § 2635.703(a). CMS process in detail with defendants. 35. Criminal Law O772(5) 18 U.S.C.A. § 641. A conscious avoidance instruction may 33. Larceny O57 be given only if the appropriate factual Requisite intent for conversion was predicate for the charge exists, i.e. the established by evidence that defendant, evidence is such that a rational juror may who was former Centers for Medicare and reach the conclusion beyond a reasonable Medicaid Services (CMS) employee, obvi- doubt that the defendant was aware of a

Pet. App. 05 24 947 FEDERAL REPORTER, 3d SERIES high probability of the fact in dispute and 39. Indictments and Charging Instru- consciously avoided confirming that fact. ments O715

36. Conspiracy O47(6) Joint proceedings must produce suffi- cient efficiencies, in light of the factual Larceny O57 overlap among charges, such that joinder O Securities Regulation 199 is proper notwithstanding the possibility of O Telecommunications 1018(4) prejudice to either or both of the defen- Government was entitled to prove de- dants resulting from the joinder. Fed. R. fendant’s knowledge of predecisional in- Crim. P. 8(b). formation concerning proposed radiation O oncology rule through circumstantial evi- 40. Criminal Law 1166(6) dence, including evidence that he had ac- Even where joinder is erroneous, the cess to information because he worked Court of Appeals will not reverse unless closely with Centers for Medicare and the misjoinder results in actual prejudice Medicaid Services (CMS) director and his because it had a substantial and injurious job responsibilities exposed him to various effect or influence in determining the matters within agency, rather than prove jury’s verdict. Fed. R. Crim. P. 8(b). precise way in which he became aware of 41. Criminal Law O1166(6) that information, in defendant’s trial on charges of wire fraud, securities fraud, Any error was harmless in joinder of conversion of U.S. property, and conspira- distinct schemes of misappropriation and cy arising from misappropriation of confi- insider trading of confidential government dential information from CMS. 18 information concerning healthcare rules, U.S.C.A. §§ 641, 1343, 1348; 5 C.F.R. where probative value of attenuated wit- § 2635.703(a). ness testimony regarding other scheme would not have resulted in any undue prej- 37. Indictments and Charging Instru- udice. 18 U.S.C.A. §§ 641, 1343, 1348; ments O777 Fed. R. Crim. P. 8(b). Joinder was permissible for distinct O schemes of misappropriation and insider 42. Criminal Law 675 trading of confidential government infor- District court acted within its discre- mation concerning healthcare rules, where tion in limiting testimony as to basis for there was substantial temporal overlap be- Centers for Medicare and Medicaid Ser- tween those schemes, schemes involved vices (CMS) proposed radiation oncology nearly identical conduct, and Centers for rule, in defendant’s trial on charges of wire Medicare and Medicaid Services (CMS) fraud, securities fraud, conversion of U.S. was victim and source of information was property, and conspiracy arising from mis- key player in both schemes. 18 U.S.C.A. appropriation of confidential information §§ 641, 1343, 1348; Fed. R. Crim. P. 8(b). from CMS, since other evidence had been introduced on that subject and further tes- 38. Indictments and Charging Instru- timony would have been cumulative. 18 O ments 715, 716 U.S.C.A. §§ 641, 1343, 1348. Joinder of defendants is proper when O the alleged acts are unified by some sub- 43. Witnesses 387 stantial identity of facts or participants, or District court acted within its discre- arise out of a common plan or scheme. tion in precluding cross-examination of Fed. R. Crim. P. 8(b). witness as to prior inconsistent statement

Pet. App. 06 U.S. v. BLASZCZAK 25 Cite as 947 F.3d 19 (2nd Cir. 2019) that market’s prediction for the home ments.’’ 18 U.S.C.A. §§ 641, 1343, 1348; healthcare cuts was 2.5% rather than 3.5% Fed. R. Evid. 803(6). as he recalled at trial, in defendant’s trial on charges of wire fraud, securities fraud, United States District Court for the conversion of U.S. property, and conspira- Southern District of New York (Kaplan, cy arising from misappropriation of confi- Judge) dential information from Centers for Medi- care and Medicaid Services (CMS), since SARAH K. EDDY, Assistant United witness recollection as to actual market States Attorney (Ian McGinley, Joshua A. consensus was collateral issue. 18 Naftalis, Won S. Shin, Assistant United U.S.C.A. §§ 641, 1343, 1348. States Attorneys, on the brief), for Geof- frey S. Berman, United States Attorney O 44. Criminal Law 422(1) for the Southern District of New York, District court acted within its discre- New York, NY, for Appellee United States tion in admitting into evidence statements of America. made in e-mails by pharmaceutical compa- DONALD B. VERILLI, JR. (Elaine J. ny employee under unindicted co-conspira- Goldenberg, Jonathan S. Meltzer, on the tor hearsay exclusion, in defendant’s trial brief), Munger, Tolles & Olson LLP, on charges of wire fraud, securities fraud, Washington, D.C., David Esseks, Eugene conversion of U.S. property, and conspira- Ingoglia, Rachel Agress, Alexander Bus- cy arising from misappropriation of confi- sey, on the brief, Allen & Overy LLP, New dential information from Centers for Medi- York, NY, for Appellant Robert Olan. care and Medicaid Services (CMS), where employee had implied agreement with ALEXANDRA A.E. SHAPIRO (Eric S. source to misappropriate confidential CMS Onley, on the brief), Shapiro Arato Bach information. 18 U.S.C.A. §§ 641, 1343, LLP, New York, NY, Dani R. James, on 1348; Fed. R. Evid. 801(d)(2)(E). the brief, Kramer Levin Naftalis & Frank- el, LLP, New York, NY, for Appellant 45. Criminal Law O436(3), 673(4) Theodore Huber. District court acted within its discre- COLLEEN P. CASSIDY, Federal De- tion in admitting minutes of corporate fenders of New York, Inc., New York, NY, meeting into evidence as business record for Appellant David Blaszczak. for purpose of proving defendants’ states DANIEL M. SULLIVAN (James M. of mind during years of charged conspira- McGuire, on the brief), Holwell Shuster & cy, subject to clear limiting instruction that Goldberg LLP, New York, NY, Stephen such evidence could not be considered Fishbein, John A. Nathanson, on the brief, against alleged source of confidential infor- Shearman & Sterling LLP, New York, mation, in defendant’s trial on charges of NY, for Appellant Christopher Worrall. wire fraud, securities fraud, conversion of U.S. property, and conspiracy arising from Peter Neiman, Wilmer Cutler Pickering misappropriation of confidential informa- Hale and Dore LLP, New York, NY, Lind- tion from Centers for Medicare and Medic- say A. Lewis, Joshua L. Dratel, P.C., New aid Services (CMS), where defendants York, NY, for Amicus Curiae National As- were principals of that corporation and sociation of Criminal Defense Lawyers. minutes reflected that someone at meeting Kendall Turner, O’Melveny & Myers had opined that ‘‘comments pre-news sug- LLP, Washington, D.C., Anton Metlitsky, gest [source] had a read of draft docu- O’Melveny & Myers, LLP, New York, NY,

Pet. App. 07 26 947 FEDERAL REPORTER, 3d SERIES for Amici Curiae Law Professors Adam C. In doing so, we hold, inter alia, that (1) Pritchard, Matthew C. Turk, Andrew N. confidential government information such Vollmer, Karen Woody. as the CMS information at issue here may constitute ‘‘property’’ in the hands of the Before: KEARSE, DRONEY, and government for purposes of the wire fraud SULLIVAN, Circuit Judges. and Title 18 securities fraud statutes, and RICHARD J. SULLIVAN, Circuit (2) the ‘‘personal-benefit’’ test established Judge: in Dirks v. SEC, 463 U.S. 646, 103 S.Ct. These consolidated appeals require us to 3255, 77 L.Ed.2d 911 (1983), does not ap- consider whether the federal wire fraud, ply to these Title 18 fraud statutes. Be- securities fraud, and conversion statutes, cause we also discern no prejudicial error codified at 18 U.S.C. §§ 1343, 1348, and with respect to the remaining issues raised 641, respectively, reach misappropriation on appeal, we affirm the judgments of the of a government agency’s confidential non- district court. public information relating to its contem- plated rules. Defendants David Blaszczak, I. BACKGROUND Theodore Huber, Robert Olan, and Chris- topher Worrall were charged with violat- A. Facts ing these statutes – and with engaging in The jury returned guilty verdicts on securities fraud in violation of Section counts charging two insider-trading 10(b) of the Securities and Exchange Act, schemes: (1) a scheme relating to Deerfield 15 U.S.C. § 78j(b), and SEC Rule 10b-5 that involved all defendants to varying de- (‘‘Title 15 securities fraud’’) – by misap- grees, and (2) a scheme relating to another propriating confidential nonpublic informa- hedge fund investment manager, Visium tion from the Centers for Medicare & Asset Management, L.P. (‘‘Visium’’), that Medicaid Services (‘‘CMS’’). The indict- involved Blaszczak only. We recite the ment principally alleged that CMS em- facts pertaining to each of these schemes ployees, including Worrall, disclosed the in turn, construing the evidence at trial agency’s confidential information to underlying the counts of conviction in the Blaszczak, a ‘‘political intelligence’’ consul- light most favorable to the prosecution. tant for hedge funds, who in turn tipped See United States v. Kirk Tang Yuk, 885 the information to Huber and Olan, em- F.3d 57, 65 (2d Cir. 2018). ployees of the healthcare-focused hedge fund Deerfield Management Company, 1. The Deerfield Scheme L.P. (‘‘Deerfield’’), which traded on it. Af- ter a one-month trial before the United At various times between 2009 and 2014, States District Court for the Southern Olan, Huber, and fellow Deerfield partner District of New York (Kaplan, J.), a jury Jordan Fogel – a cooperating witness who found Defendants guilty of wire fraud, pleaded guilty and testified at trial – ap- conversion, and, with the exception of proached Blaszczak for the purpose of ob- Worrall, Title 18 securities fraud and con- taining so-called ‘‘predecisional’’ informa- spiracy. The jury acquitted Defendants on tion concerning CMS’s contemplated rules all counts alleging Title 15 securities and regulations. The three Deerfield part- fraud. ners knew that Blaszczak, who had worked Defendants now challenge their convic- at CMS before becoming a consultant for tions on various grounds. For the reasons hedge funds, enjoyed unique access to the set forth below, we reject these challenges. agency’s predecisional information through

Pet. App. 08 U.S. v. BLASZCZAK 27 Cite as 947 F.3d 19 (2nd Cir. 2019)

his inside sources at the agency. Because changes. Fogel, in turn, shared this infor- other consultants did not have access to mation with Huber and Olan, and together Blaszczak’s sources, the Deerfield partners the three of them relied on it – in combina- counted him as a particularly lucrative tion with other confidential CMS informa- fount of illegal market ‘‘edge.’’ App’x at tion that Blaszczak passed them over the 567, 606. next few weeks – in recommending that This illegal market edge first paid off for Deerfield short millions of dollars in the the three Deerfield partners in July 2009, shares of companies that would be hurt by after Blaszczak passed them nonpublic the reimbursement changes. Deerfield CMS information concerning both the tim- earned profits of $2.73 million from trades ing and substance of an upcoming pro- relating to this radiation oncology rule, posed CMS rule change that would reduce which was publicly announced on July 6, the reimbursement rate for certain radia- 2012. tion oncology treatments. The Deerfield In February 2013, shortly after Fogel partners sought to maximize this market moved to a different group within Deer- edge by trading while ‘‘the information field, he reached out to Blaszczak in the wasn’t known to others, and TTT wasn’t hopes of ‘‘re-ignit[ing] the Blaszczak-Fogel public.’’ Id. at 593. In late June 2009, Olan, money printing machine.’’ Supp. App’x at Huber, and Fogel directed Deerfield to 6. As Fogel testified at trial, the ‘‘Blaszc- enter orders shorting approximately $33 zak-Fogel money printing machine’’ meant million worth of stock in radiation-device that ‘‘Blaszczak had a long history of pro- manufacturer Varian Medical Systems viding [Fogel] and [his] teammates non- (‘‘Varian’’), a company that would be hurt public information that [they] could trade by CMS’s proposed rule. Blaszczak’s infor- on, and it was a great asset to get edge for mation was consistent with the proposed investments.’’ App’x at 581. rule that CMS ultimately announced on Fogel did not have to wait long for the July 1, 2009, and as a result of the Varian machine to reignite. In June 2013, Blaszc- trade, Deerfield made $2.76 million in prof- zak told Fogel that he expected CMS to its. propose cutting the reimbursement rate Deerfield again traded on confidential for end-stage renal disease (‘‘ESRD’’) CMS information obtained from Blaszczak treatments by 12 percent. Although in 2012. This time, Blaszczak obtained the Blaszczak did not reveal the source of his predecisional information at issue from information to Fogel, the prediction was so Worrall, a CMS employee who had previ- specific – and so different from the market ously worked with Blaszczak at the agency consensus – that Fogel believed it came and remained friends with him after ‘‘from a credible source inside of CMS.’’ Id. Blaszczak left CMS to become a hedge at 582. Still, Fogel remained anxious about fund consultant. Blaszczak met Worrall at the outlier status of Blaszczak’s prediction CMS’s headquarters in Maryland on May and continued to check in with him about 8, 2012; the following day, Blaszczak his level of certainty. On June 25, 2013, emailed Fogel to set up a phone call so less than a week before CMS announced that he could update him on one of Fogel’s the ESRD rule, Blaszczak told Fogel that ‘‘favorite topics.’’ Id. at 2439. On the call, there was ‘‘[n]o change in [his] numbers’’ Blaszczak provided Fogel with predeci- and that he was ‘‘pretty confident’’ in his sional CMS information about additional information. Id. at 2024. Fogel again took radiation oncology reimbursement rate this to mean that Blaszczak obtained the

Pet. App. 09 28 947 FEDERAL REPORTER, 3d SERIES information from a reliable inside source, which time Blaszczak would provide him and further inferred that the public an- with both public and nonpublic information nouncement of the proposed rate cut (the concerning the healthcare industry. Pla- timing of which was also nonpublic) was ford, like the Deerfield partners, especially around the corner and thus less likely to valued Blaszczak’s nonpublic CMS infor- change. On the basis of this confidential mation due to the market edge it gave him. nonpublic information, Fogel directed Indeed, Plaford considered Blaszczak’s Deerfield to enter orders shorting stock in CMS information to be ‘‘much more accu- Fresenius Medical Care, a public company rate’’ than the information provided by that would be hurt by the reimbursement other consultants, since it came ‘‘directly rate cuts. CMS publicly announced the 12 from the horse’s mouth,’’ meaning Blaszc- percent rate cut on July 1, 2013, and Deer- zak’s friends and former colleagues at field earned approximately $860,000 in CMS. App’x at 750–51. profits from the trade. In May 2013, for example, Blaszczak Blaszczak continued to provide Fogel tipped Plaford that he expected CMS to with predecisional CMS information in ad- propose cutting the reimbursement rate vance of CMS’s announcement of the final for home healthcare coverage by between ESRD rule on November 22, 2013. In par- three and three-and-a-half percent per ticular, Blaszczak informed Fogel that the year between 2014 and 2017. In the ensu- final ESRD rule would keep the 12 percent ing weeks, Plaford arranged phone calls rate cut but would be phased in over three with Blaszczak to discuss the sources of to four years. Based on that information, his information and thus his level of cer- Fogel recommended that Deerfield enter tainty, an issue that Plaford did not want orders to short stock in Fresenius and to discuss over email ‘‘because it was po- DaVita Healthcare Partners Inc. Deerfield tentially incriminating.’’ Id. at 752. On the did so, earning profits of approximately phone call, Blaszczak told Plaford that he $791,000. Immediately after CMS an- had a ‘‘high conviction’’ that his informa- nounced the final ESRD rule, Fogel tion was accurate because he was ‘‘inter- emailed his colleagues at Deerfield to acting directly with his counterparties in praise Blaszczak for his ESRD reimburse- CMS [who] were working on the rule, and ment predictions: ‘‘I told u guys blazcack they were telling him TTT [what] the cut [sic] is the man. TTT [H]e has crushed it on would be.’’ Id. Based on Blaszczak’s infor- these two rules both times round.’’ Supp. mation, Plaford directed Visium to main- App’x at 10. tain its short positions for Amedisys Inc. and Gentiva Health Services Inc., and to 2. The Visium Scheme buy put-options in those companies. Fol- Around the same time that Blaszczak lowing CMS’s June 27, 2013 announcement was tipping confidential CMS information of the proposed home healthcare rule, to his contacts at Deerfield, he also provid- which included a three-and-a-half percent ed similar information to Christopher Pla- annual rate cut consistent with Blaszczak’s ford, a portfolio manager at the hedge information, Visium earned approximately fund Visium. After subsequently pleading $330,000 in trading profits. guilty pursuant to a cooperation agree- ment, Plaford testified that he used B. Procedural History Blaszczak as a political-intelligence consul- On March 5, 2018, the government filed tant from around 2010 to 2013, during an eighteen-count superseding indictment

Pet. App. 10 U.S. v. BLASZCZAK 29 Cite as 947 F.3d 19 (2nd Cir. 2019) in the United States District Court for the order to convict Worrall of Title 15 securi- Southern District of New York setting ties fraud, it needed to find that he tipped forth allegations relating to the Deerfield confidential CMS information in exchange scheme (Counts One through Sixteen) and for a ‘‘personal benefit;’’ (2) in order to Visium scheme (Counts Seventeen and convict Blaszczak of Title 15 securities Eighteen). Counts One and Two charged fraud, it additionally needed to find that he Defendants with participating in conspira- knew that Worrall disclosed the informa- cies centering on the misappropriation of tion in exchange for a personal benefit; confidential CMS information between and (3) in order to convict Huber or Olan 2009 and 2014. In Counts Three through of Title 15 securities fraud, it needed to Ten, the indictment charged Defendants find that Huber or Olan knew that a CMS with conversion of U.S. property (Count insider tipped the information in exchange Three), Title 15 securities fraud (Counts for a personal benefit. App’x at 1042–43. Four through Eight), wire fraud (Count The district court, however, refused to give Nine), and Title 18 securities fraud (Count Dirks-style instructions on the wire fraud Ten), relating to the misappropriation of and Title 18 securities fraud counts. The confidential CMS information that per- district court instead instructed the jury tained to the July 2012 proposed radiation that wire fraud ‘‘includes the act of embez- TTT oncology rule. Counts Eleven and Twelve zlement, which is the fraudulent ap- charged Blaszczak and Worrall with con- propriation to one’s own use of the money version of U.S. property (Count Eleven) or property entrusted to one’s care by and wire fraud (Count Twelve) for alleged- someone else.’’ Id. at 1044–45; see Carpen- ly misappropriating confidential CMS in- ter v. United States, 484 U.S. 19, 27, 108 formation relating to a company called S.Ct. 316, 98 L.Ed.2d 275 (1987). The dis- NxStage Medical Inc. The remaining four trict court similarly instructed the jury, for the Title 18 securities fraud counts, that it Deerfield-related counts charged Blaszc- could find the existence of a scheme to zak and Worrall with conversion of U.S. defraud if a defendant ‘‘participated in a property (Count Thirteen), Title 15 securi- scheme to embezzle or convert confidential ties fraud (Count Fourteen), wire fraud information from CMS by wrongfully tak- (Count Fifteen), and Title 18 securities ing that information and transferring it to fraud (Count Sixteen), based on the misap- his own use or the use of someone else.’’ propriation of confidential CMS informa- App’x at 1045. For both Title 18 fraud tion concerning the 2013 proposed and fi- offenses, the district court further instruct- nal ESRD rules. Counts Seventeen and ed the jury that it could only convict if it Eighteen charged Blaszczak alone with found that the defendant it was consider- conspiracy and conversion of U.S. proper- ing knowingly and willfully participated in ty, respectively, for providing confidential the fraudulent scheme. CMS information to Plaford as part of the Visium scheme. On May 3, 2018, after four days of delib- erations, the jury returned a split verdict. On April 2, 2018, the case proceeded to a The jury acquitted all defendants on the jury trial before Judge Kaplan. The par- Title 15 securities fraud counts; Blaszczak ties rested their cases three weeks later, and Worrall on the offenses charged in on April 23, 2018, and after summations, Counts Eleven and Twelve relating to the the district court charged the jury. NxStage information; and Worrall on the In particular, the district court instruct- conspiracies charged in Counts One and ed the jury pursuant to Dirks that, (1) in Two and the substantive offenses charged

Pet. App. 11 30 947 FEDERAL REPORTER, 3d SERIES

in Counts Thirteen through Sixteen. The We also review de novo the sufficiency of jury nevertheless found all defendants the evidence, Sabhnani, 599 F.3d at 241, guilty of the conversion and wire fraud recognizing, of course, that a defendant offenses charged in Counts Three and raising such a challenge ‘‘bears a heavy Nine, respectively; all defendants but Wor- burden because a reviewing court must rall guilty of the conspiracy offenses consider the evidence ‘in the light most charged in Counts One and Two as well as favorable to the prosecution’ and uphold Title 18 securities fraud as charged in the conviction if ‘any rational trier of fact Count Ten; and Blaszczak alone guilty of could have found the essential elements of the offenses charged in Counts Thirteen the crime beyond a reasonable doubt,’ ’’ and Fifteen through Eighteen. United States v. Aguilar, 585 F.3d 652, 656 On September 13, 2018, the district (2d Cir. 2009) (quoting Jackson v. Virgi- court denied from the bench Defendants’ nia, 443 U.S. 307, 319, 99 S.Ct. 2781, 61 post-trial motions for a new trial and/or L.Ed.2d 560 (1979)); accord United States judgment of acquittal and proceeded to v. Harvey, 746 F.3d 87, 89 (2d Cir. 2014). sentencing. The district court sentenced The district court’s evidentiary rulings are Blaszczak to twelve months and one day of reviewed for abuse of discretion. See Unit- imprisonment, Worrall to twenty months’ ed States v. Nektalov, 461 F.3d 309, 318 imprisonment, and Huber and Olan each to (2d Cir. 2006). thirty-six months’ imprisonment and fines of $1,250,000. The district court also or- III. DISCUSSION dered Blaszczak to forfeit $727,500, Huber Defendants challenge their convictions to forfeit $87,078, and Olan to forfeit on several grounds. They argue that (1) $98,244, and ordered joint and several res- the confidential CMS information at issue titution in the amount of $1,644.26 against is not ‘‘property’’ in the hands of CMS for all defendants to cover the costs that CMS purposes of the wire fraud and Title 18 expended on witnesses’ travel in connec- securities fraud statutes; (2) the district tion with the criminal investigation and court erred by refusing to instruct the jury trial. Finally, the district court granted all on the Dirks personal-benefit test as to the defendants bail pending appeal on the Title 18 fraud counts; (3) Defendants’ con- ground that the forthcoming appeal would victions for converting U.S. property were present novel and substantial questions. infected by a series of legal and factual See United States v. Randell, 761 F.2d errors; (4) the evidence at trial was insuffi- 122, 125 (2d Cir. 1985). Defendants timely cient on all counts; (5) Counts Seventeen appealed. and Eighteen, charging Blaszczak alone in the Visium scheme, were misjoined with II. JURISDICTION AND STANDARD OF REVIEW the other counts; and (6) the district court [1–3] We have jurisdiction pursuant to made a variety of evidentiary errors. We 28 U.S.C. § 1291. We review de novo ques- address each of these arguments in turn. tions of statutory interpretation, chal- lenges to the district court’s jury instruc- A. ‘‘Property’’ under 18 U.S.C. tions, and the propriety of joinder. See §§ 1343, 1348 United States v. Gayle, 342 F.3d 89, 91 (2d [4] Defendants argue that their convic- Cir. 2003); United States v. Sabhnani, 599 tions for fraud under Title 18 must be F.3d 215, 237 (2d Cir. 2010); United States reversed because there was insufficient ev- v. Shellef, 507 F.3d 82, 96 (2d Cir. 2007). idence to prove that they engaged in a

Pet. App. 12 U.S. v. BLASZCZAK 31 Cite as 947 F.3d 19 (2nd Cir. 2019)

scheme to defraud CMS of ‘‘property.’’ 18 pressly tied their sufficiency claim to the U.S.C. §§ 1343, 1348.1 The gravamen of Supreme Court’s decision in Cleveland, their argument is that a government agen- thus raising the broader threshold ques- cy’s confidential information is not ‘‘prop- tion of whether a government agency’s erty’’ in the hands of the agency under the confidential regulatory information may Supreme Court’s decision in Cleveland v. constitute ‘‘property’’ in the hands of the United States, 531 U.S. 12, 121 S.Ct. 365, agency as a general matter. In answering 148 L.Ed.2d 221 (2000), because the agen- this question, we are not bound by the cy has a ‘‘purely regulatory’’ interest in district court’s jury instruction that ‘‘confi- such information, id. at 22, 121 S.Ct. 365. dential government information may be [5, 6] As a preliminary matter, the gov- considered to be property,’’ id., since ‘‘[a] ernment contends that Defendants failed reviewing court’s limited determination on to preserve the argument that confidential sufficiency review TTT does not rest on government information is not ‘‘property,’’ how the jury was instructed,’’ Musacchio since Defendants did not object to the v. United States, ––– U.S. ––––, 136 S. Ct. district court’s instruction that ‘‘confiden- 709, 715, 193 L.Ed.2d 639 (2016). tial government information may be con- [7] Proceeding to the merits, we afford sidered to be property’’ for purposes of Title 18 securities fraud. App’x at 1045; see the same meaning to the word ‘‘property’’ also id. (instructing the jury, for purposes in both the wire fraud and Title 18 securi- of the wire fraud counts, that the govern- ties fraud statutes. See S. Rep. No. 107- ment was required to prove that a defen- 146, at 20 (2002) (Title 18 securities fraud dant intended to deprive CMS of ‘‘some- statute created to be comparable to Title thing of value – for example, confidential 18 bank and healthcare fraud statutes); material, non-public information’’). But Neder v. United States, 527 U.S. 1, 20, 119 while Defendants did not challenge the S.Ct. 1827, 144 L.Ed.2d 35 (1999) (Title 18 pertinent jury instructions in the district mail, wire, and bank fraud statutes should court (and have not done so on appeal), be analyzed similarly). We may also look to Defendants filed a Rule 29(a) motion for a cases interpreting the same word in the judgment of acquittal on the ground that mail fraud statute. See, e.g., Pasquantino the evidence at trial was insufficient to v. United States, 544 U.S. 349, 355 n.2, 125 establish that CMS’s information was S.Ct. 1766, 161 L.Ed.2d 619 (2005). Under ‘‘property’’ in the hands of the agency. each of these fraud statutes, the word Contrary to the government’s argument, ‘‘property’’ is construed in accordance with we do not construe Defendants’ Rule 29(a) its ordinary meaning: ‘‘something of value’’ motion in the district court as raising a in the possession of the property holder (in claim distinct from their sufficiency claim this context, the fraud victim). Pasquanti- on appeal; at both stages, Defendants ex- no, 544 U.S. at 355, 125 S.Ct. 1766 (quoting

1. The superseding indictment charged Defen- use the term ‘‘property,’’ proscribing instead dants with violating both subsections (1) and a ‘‘scheme or artifice TTT to defraud any per- (2) of 18 U.S.C. § 1348, either of which may son in connection with’’ securities. 18 U.S.C. independently support a conviction. See Unit- § 1348. Nevertheless, the government does ed States v. Mahaffy, 693 F.3d 113, 125 (2d not argue that the object of a ‘‘scheme to Cir. 2012). While subsection (2) proscribes a defraud’’ in subsection (1) can be anything ‘‘scheme or artifice TTT to obtain, by means of other than ‘‘property,’’ and thus we assume, false or fraudulent pretenses, TTT any money for purposes of this case, that the ‘‘property’’ or property in connection with the purchase requirement in subsection (2) also applies in or sale of’’ securities, subsection (1) does not subsection (1).

Pet. App. 13 32 947 FEDERAL REPORTER, 3d SERIES

McNally v. United States, 483 U.S. 350, fraud statute did ‘‘not reach fraud in ob- 358, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), taining a state or municipal license’’ to superseded by statute on other grounds as operate video poker machines, holding that stated in Skilling v. United States, 561 ‘‘such a license [was] not ‘property’ in the U.S. 358, 130 S.Ct. 2896, 177 L.Ed.2d 619 government regulator’s hands.’’ 531 U.S. at (2010)); see also id. at 356, 125 S.Ct. 1766 20, 121 S.Ct. 365. The Court reasoned that (citing Black’s Law Dictionary 1382 (4th (1) the licenses themselves had no econom- ed. 1951) (defining ‘‘property’’ as ‘‘ex- ic value until they were issued to a private tend[ing] to every species of valuable right actor, and (2) the state’s right to control and interest’’)). In applying this general the issuance of its licenses ‘‘implicated [its] notion of property to the facts of this case, role as sovereign, not as property holder.’’ in which the fraud victim is a government Id. at 22–24, 121 S.Ct. 365. Thus, the Court agency and the claimed property is confi- concluded that the government’s ‘‘theories dential information regarding contemplat- of property rights TTT [both] stray[ed] ed regulatory action, we are guided by two from traditional concepts of property’’ and precedents in particular: Carpenter and invited a ‘‘sweeping expansion of federal Cleveland. criminal jurisdiction in the absence of a clear statement by Congress.’’ Id. at 24, In Carpenter, the Supreme Court held 121 S.Ct. 365. that the publication schedule and contents of forthcoming articles in a Wall Street While Cleveland remains good law, Journal column were the Journal’s ‘‘prop- courts have consistently rejected at- erty’’ because ‘‘[t]he Journal had a prop- tempts – similar to those advanced by Defendants here – to apply its holding erty right in keeping confidential and expansively. See, e.g., Pasquantino, 544 making exclusive use’’ of the information U.S. at 357, 125 S.Ct. 1766 (‘‘Cleveland is before publication. 484 U.S. at 26, 108 different from this case.’’); Fountain v. S.Ct. 316. In fact, the Court noted that United States, 357 F.3d 250, 256 (2d Cir. ‘‘[c]onfidential business information ha[d] 2004) (explaining that Cleveland had only a long been recognized as property.’’ Id. ‘‘modest’’ effect on the existing legal land- The Court further noted that pre-publica- scape); United States v. Middendorf, No. tion information was ‘‘stock in trade, to be 18-cr-36 (JPO), 2018 WL 3443117, at *8–9 gathered at the cost of enterprise, organi- (S.D.N.Y. July 17, 2018) (rejecting a Cleve- zation, skill, labor, and money, and to be land-based argument similar to the one distributed and sold to those who [would] raised here). As the Supreme Court has pay money for it.’’ Id. (quoting Int’l News clarified, Cleveland simply ‘‘held that a Serv. v. Associated Press, 248 U.S. 215, [s]tate’s interest in an unissued video pok- 236, 39 S.Ct. 68, 63 L.Ed. 211 (1918)). The er license was not ‘property,’ because the Court therefore concluded that a Journal interest in choosing particular licensees employee fraudulently misappropriated was ‘purely regulatory’ and ‘could not be his employer’s ‘‘property’’ in violation of economic.’ ’’ Pasquantino, 544 U.S. at 357, the mail and wire fraud statutes when he 125 S.Ct. 1766 (emphasis added) (brackets knowingly disclosed the Journal’s confi- omitted) (quoting Cleveland, 531 U.S. at dential pre-publication information to a 22–23, 121 S.Ct. 365). Consistent with this stockbroker who traded on it. Id. at 28, formulation, we have observed that Cleve- 108 S.Ct. 316. land’s ‘‘particular selection of factors’’ did By contrast, thirteen years later, the not establish ‘‘rigid criteria for defining Court in Cleveland held that the mail property but instead TTT provid[ed] per-

Pet. App. 14 U.S. v. BLASZCZAK 33 Cite as 947 F.3d 19 (2nd Cir. 2019)

missible considerations.’’ Fountain, 357 taining the confidentiality of its nonpublic F.3d at 256. The considerations relied upon predecisional information – resources that by the Court in Cleveland are thus in are devalued when the information is addition to considerations recognized in leaked to members of the public. See Car- other cases, such as the ‘‘right to exclude’’ penter, 484 U.S. at 26, 108 S.Ct. 316; see that was ‘‘deemed crucial in defining prop- also, e.g., Middendorf, 2018 WL 3443117, erty’’ in Carpenter. Id. at *9 (concluding that a statutory non- Here, we find it most significant that profit’s confidential inspection lists were CMS possesses a ‘‘right to exclude’’ that is ‘‘certainly something of value to the [non- comparable to the proprietary right recog- profit], which invested time and resources nized in Carpenter. Like the private news into their creation’’ (internal quotation company in Carpenter, CMS has a ‘‘prop- marks omitted)). Relatedly, the selective erty right in keeping confidential and mak- leaking of confidential CMS information ing exclusive use’’ of its nonpublic predeci- risks hampering the agency’s decision- sional information. Carpenter, 484 U.S. at making process. Although this risk obvi- 26, 108 S.Ct. 316. In stark contrast to a ously implicates CMS’s regulatory inter- state’s right to issue or deny a poker li- ests, it also implicates CMS’s economic cense – a ‘‘paradigmatic exercise[ ] of the interest in making efficient use of its limit- [state’s] traditional police powers’’ – CMS’s ed time and resources. As former CMS right to exclude the public from accessing Director Dr. Jonathan Blum testified, its confidential predecisional information leaks of confidential information could re- squarely implicates the government’s role sult in unbalanced lobbying efforts, which as property holder, not as sovereign. would in turn impede the agency’s efficient Cleveland, 531 U.S. at 23, 121 S.Ct. 365. functioning by making it ‘‘more difficult to This view is consistent with pre-Cleveland manage the process flow and to convince decisions from this and other Circuits. See [Blum’s] superiors of the right course for United States v. Girard, 601 F.2d 69, 71 the Medicare program.’’ App’x at 467. (2d Cir. 1979) (concluding that ‘‘the [g]ov- Leaks may also require the agency to ernment has a property interest in certain ‘‘tighten up’’ its internal information-shar- of its private records,’’ including the confi- ing processes, again with the result that dential information contained in those rec- the agency would become less efficient. Id. ords); United States v. Czubinski, 106 F.3d at 766; see also EPA v. Mink, 410 U.S. 73, 1069, 1074 (1st Cir. 1997) (holding that the 87, 93 S.Ct. 827, 35 L.Ed.2d 119 (1973) IRS’s confidential taxpayer information (explaining that Congress enacted the ‘‘de- ‘‘may constitute intangible ‘property’ ’’ un- liberative process’’ exemption to the Free- der the wire fraud statute (citing Carpen- dom of Information Act’s disclosure re- ter, 484 U.S. at 26, 108 S.Ct. 316)). quirements, 5 U.S.C. § 552(b)(5), because Furthermore, although we do not read the ‘‘efficiency of [g]overnment would be Cleveland as strictly requiring the govern- greatly hampered if, with respect to legal ment’s property interest to be ‘‘economic’’ and policy matters, all [g]overnment agen- in nature, the government presented evi- cies were prematurely forced to ‘operate in dence that CMS does have an economic a fishbowl.’ ’’ (quoting S. Rep. No. 89-813, interest in its confidential predecisional in- at 9 (1965))), superseded by statute on formation. For example, the evidence at other grounds as stated in CIA v. Sims, trial established that CMS invests time 471 U.S. 159, 190 n.5, 105 S.Ct. 1881, 85 and resources into generating and main- L.Ed.2d 173 (1985).

Pet. App. 15 34 947 FEDERAL REPORTER, 3d SERIES

Despite CMS’s proprietary right to ex- text of confidential government informa- clude and well-recognized economic inter- tion. See, e.g., Girard, 601 F.2d at 71; see ests, Defendants argue that the confiden- also Pasquantino, 544 U.S. at 356, 125 tial CMS information at issue in this case S.Ct. 1766 (‘‘The fact that the victim of the was not ‘‘property’’ because there was no fraud happens to be the government, rath- evidence at trial to establish that CMS er than a private party, does not lessen the suffered an actual monetary loss. In sup- injury.’’); Middendorf, 2018 WL 3443117, port of this argument, Defendants mainly at *8 (explaining that the ‘‘reasoning of rely on a single sentence in this Court’s Carpenter supports the conclusion that decision in Fountain: ‘‘[Cleveland] indi- confidential information – whether held by cates that, in the context of government the government [or] a private entity TTT – regulation, monetary loss presents a criti- is ‘property’ ’’). It is abundantly clear that cal, perhaps threshold consideration.’’ 357 government agencies have strong inter- F.3d at 257. For two reasons, this sentence ests – both regulatory and economic – in cannot bear the weight Defendants place controlling whether, when, and how to dis- on it. close confidential information relating to their contemplated rules. See Mink, 410 [8, 9] First, Fountain, like Cleveland, U.S. at 87, 93 S.Ct. 827 (recognizing the was not a case about confidential govern- important ‘‘public policy TTT of open, frank ment information – it simply held that discussion between subordinate and chief taxes owed to a government may consti- concerning administrative action’’ (internal tute ‘‘property’’ in its hands – and thus we quotation marks omitted)); supra pp. 33– do not believe that Fountain’s reference to 34. Although fraudulent interference with ‘‘the context of government regulation’’ these interests may at times result in mon- contemplated the circumstances presented etary loss to the fraud victim, nothing in here. Second, and more fundamentally, the Title 18 fraud statutes requires that to while monetary loss may generally be a be so. useful tool for distinguishing the govern- ment’s property interests from its ‘‘purely [10] In sum, the government’s theory regulatory’’ interests, Cleveland did not, of property rights over a regulatory agen- we emphasize, establish any ‘‘rigid criteria cy’s confidential predecisional information for defining property.’’ Id. at 256. Nor do does not ‘‘stray from traditional concepts we see any reason to impose a rigid ‘‘mon- of property,’’ Cleveland, 531 U.S. at 24, 121 etary loss’’ criterion here. Such a require- S.Ct. 365, but rather is entirely consistent ment would be at odds with Carpenter, with them. We therefore hold that, in gen- which squarely rejected the argument eral, confidential government information ‘‘that a scheme to defraud requires a mon- may constitute government ‘‘property’’ for etary loss,’’ and instead found it ‘‘sufficient purposes of 18 U.S.C. §§ 1343 and 1348, that the Journal ha[d] been deprived of its and that here, there was sufficient evi- right to exclusive use of the information’’ dence to establish that the CMS informa- because ‘‘exclusivity is an important aspect tion at issue was ‘‘property’’ in the hands of confidential business information and of CMS. most private property for that matter.’’ 484 U.S. at 26–27, 108 S.Ct. 316. Although B. Whether Dirks v. SEC applies to CMS is not a private entity, Carpenter’s 18 U.S.C. §§ 1343 and 1348 reasoning applies with equal force, since [11–13] Under Dirks, an insider may exclusivity is no less important in the con- not be convicted of Title 15 securities

Pet. App. 16 U.S. v. BLASZCZAK 35 Cite as 947 F.3d 19 (2nd Cir. 2019) fraud unless the government proves that rities fraud). According to this theory, he breached a duty of trust and confidence ‘‘[t]he concept of ‘fraud’ includes the act of by disclosing material, nonpublic informa- embezzlement, which is ‘the fraudulent ap- tion in exchange for a ‘‘personal benefit.’’ propriation to one’s own use of the money 463 U.S. at 663, 103 S.Ct. 3255. Similarly, a or goods entrusted to one’s care by anoth- tippee may not be convicted of such fraud er.’ ’’ Carpenter, 484 U.S. at 27, 108 S.Ct. unless he utilized the inside information 316 (quoting Grin v. Shine, 187 U.S. 181, knowing that it had been obtained in 189, 23 S.Ct. 98, 47 L.Ed. 130 (1902)). The breach of the insider’s duty. See United undisclosed misappropriation of confiden- States v. Newman, 773 F.3d 438, 447–49 tial information, in breach of a fiduciary or (2d Cir. 2014), abrogated on other grounds similar duty of trust and confidence, ‘‘con- by Salman v. United States, ––– U.S. ––––, stitutes fraud akin to embezzlement.’’ 137 S. Ct. 420, 196 L.Ed.2d 351 (2016). O’Hagan, 521 U.S. at 654, 117 S.Ct. 2199; Here, Defendants claim that the district see also United States v. Chestman, 947 court erred by not instructing the jury F.2d 551, 566–67, 571 (2d Cir. 1991) (en that Dirks’s personal-benefit test also ap- banc). plied to the wire fraud and Title 18 securi- [17] While the Title 18 fraud statutes ties fraud counts. In essence, Defendants and Title 15 fraud provisions thus share argue that the term ‘‘defraud’’ should be similar text and proscribe similar theories construed to have the same meaning of fraud, these common features have little across the Title 18 fraud provisions and to do with the personal-benefit test. Rath- Rule 10b-5, so that the elements of insider- er, the personal-benefit test is a judge- trading fraud are the same under each of made doctrine premised on the Exchange these provisions. We disagree. Act’s statutory purpose. As Dirks ex- [14–16] We begin by noting what the plained, in order to protect the free flow of Title 18 fraud statutes and Title 15 fraud information into the securities markets, provisions have in common: their text does Congress enacted the Title 15 fraud provi- not mention a ‘‘personal benefit’’ test. sions with the limited ‘‘purpose of TTT Rather, these provisions prohibit, with cer- eliminat[ing] [the] use of inside informa- tain variations, schemes to ‘‘defraud.’’ 18 tion for personal advantage.’’ 463 U.S. at U.S.C. §§ 1343, 1348(1); 17 C.F.R. 662, 103 S.Ct. 3255 (emphasis added) (in- § 240.10b-5(a); see 18 U.S.C. § 1348(2) ternal quotation marks omitted). Dirks ef- (prohibiting schemes to obtain certain fectuated this purpose by holding that an property ‘‘by means of false or fraudulent insider could not breach his fiduciary pretenses’’); 15 U.S.C. § 78j(b) (prohibiting duties by tipping confidential information the use of any ‘‘manipulative or deceptive unless he did so in exchange for a personal device’’). For each of these provisions, the benefit. Id. at 662–64, 103 S.Ct. 3255; see term ‘‘defraud’’ encompasses the so-called also Chestman, 947 F.2d at 581 (Winter, ‘‘embezzlement’’ or ‘‘misappropriation’’ J., concurring in part and dissenting in theory of fraud. See United States v. part) (observing that whereas the theory O’Hagan, 521 U.S. 642, 653–54, 117 S.Ct. of fraud recognized in Carpenter ‘‘is de- 2199, 138 L.Ed.2d 724 (1997) (Title 15 se- rived from the law of theft or embezzle- curities fraud); Carpenter, 484 U.S. at 27, ment,’’ the ‘‘Dirks rule is derived from 108 S.Ct. 316 (mail and wire fraud); see securities law, and TTT [is] influenced by also, e.g., United States v. Mahaffy, 693 the need to allow persons to profit from F.3d 113, 123 (2d Cir. 2012) (Title 18 secu- generating information about firms so that

Pet. App. 17 36 947 FEDERAL REPORTER, 3d SERIES the pricing of securities is efficient’’); Unit- federal mail or wire fraud.’’), abrogated on ed States v. Pinto-Thomaz, 352 F. Supp. other grounds by O’Hagan, 521 U.S. 642, 3d 287, 298 (S.D.N.Y. 2018) (Rakoff, J.) 117 S.Ct. 2199. In short, because the per- (‘‘Although [the Dirks personal-benefit sonal-benefit test is not grounded in the test] was novel law, the Court reasoned embezzlement theory of fraud, but rather that this test was consistent with the ‘pur- depends entirely on the purpose of the pose of the [Title 15] securities laws TTT to Exchange Act, we decline to extend Dirks eliminate use of inside information for per- beyond the context of that statute. sonal advantage.’ ’’ (quoting Dirks, 463 [20] Our conclusion is the same for U.S. at 662, 103 S.Ct. 3255)). both the wire fraud and Title 18 securities [18, 19] But once untethered from the fraud statutes. While it is true that Sec- statutory context in which it arose, the tion 1348 of Title 18, unlike the wire personal-benefit test finds no support in fraud statute, concerns the general sub- the embezzlement theory of fraud recog- ject matter of securities law, Section 1348 nized in Carpenter. In the context of em- and the Exchange Act do not share the bezzlement, there is no additional require- same statutory purpose. See United ment that an insider breach a duty to the States v. Mills, 850 F.3d 693, 699 (4th owner of the property, since ‘‘it is impossi- Cir. 2017) (‘‘The doctrine of in pari mate- ble for a person to embezzle the money of ria is inapplicable when statutes have dif- another without committing a fraud upon ferent purposes.’’). Indeed, Section 1348 him.’’ Grin, 187 U.S. at 189, 23 S.Ct. 98. was added to the criminal code by the Because a breach of duty is thus inherent Sarbanes-Oxley Act of 2002 in large part in Carpenter’s formulation of embezzle- to overcome the ‘‘technical legal require- ment, there is likewise no additional re- ments’’ of the Title 15 fraud provisions. S. quirement that the government prove a Rep. No. 107-146, at 6; see United States breach of duty in a specific manner, let v. Hoskins, 902 F.3d 69, 81 n.5 (2d Cir. alone through evidence that an insider 2018) (‘‘As a general matter, we may con- tipped confidential information in exchange sider reliable legislative history where, as for a personal benefit. See O’Hagan, 521 here, the statute is susceptible to diver- U.S. at 682 n.1, 117 S.Ct. 2199 (Thomas, J., gent understandings and, equally impor- concurring in the judgment in part and tant, where there exists authoritative leg- dissenting in part) (‘‘Of course, the ‘use’ to islative history that assists in discerning which one puts misappropriated property what Congress actually meant.’’ (internal need not be one designed to bring profit to quotation marks omitted)). In particular, the misappropriator: Any ‘fraudulent ap- Congress intended for Section 1348 to propriation to one’s own use’ constitutes ‘‘supplement the patchwork of existing embezzlement, regardless of what the em- technical securities law violations with a bezzler chooses to do with the money.’’); more general and less technical provision, see also United States v. Bryan, 58 F.3d with elements and intent requirements 933, 953 (4th Cir. 1995) (‘‘Those who trade comparable to current bank fraud and on purloined information but who do not health care fraud statutes.’’ S. Rep. No. come within the TTT definition of ‘insider’ 107-146, at 14. Given that Section 1348 [set forth in Chiarella v. United States, was intended to provide prosecutors with 445 U.S. 222, 100 S.Ct. 1108, 63 L.Ed.2d a different – and broader – enforcement 348 (1980), and Dirks] are still almost cer- mechanism to address securities fraud tain to be subject to criminal liability for than what had been previously provided

Pet. App. 18 U.S. v. BLASZCZAK 37 Cite as 947 F.3d 19 (2nd Cir. 2019) in the Title 15 fraud provisions, we de- [one’s] use or the use of another TTT any cline to graft the Dirks personal-benefit TTT thing of value of the United States,’’ or test onto the elements of Title 18 securi- ‘‘receiv[ing] TTT the same with intent to ties fraud. convert it to [one’s] use or gain, knowing it Finally, Defendants argue that we to have been TTT converted.’’ 18 U.S.C. should extend Dirks beyond the Title 15 § 641. Defendants challenge their convic- fraud provisions because otherwise the tions under this statute on five grounds. government may avoid the personal-bene- All defendants argue that (1) the evidence fit test altogether by prosecuting insider- was insufficient to establish that they ‘‘ser- trading fraud with less difficulty under the iously interfered’’ with CMS’s ownership of Title 18 fraud statutes – particularly the its confidential information, as required to Title 18 securities fraud statute, which (un- prove conversion, and (2) information is like the wire fraud statute) does not re- not a ‘‘thing of value’’ for purposes of quire proof that wires were used to carry Section 641. Olan, Huber, and Blaszczak out the fraud. But whatever the force of further argue that (3) the conversion stat- this argument as a policy matter, we may ute is unconstitutionally vague as applied not rest our interpretation of the Title 18 to them, and (4) the evidence was insuffi- fraud provisions ‘‘on such enforcement pol- cient to establish scienter. Finally, Olan icy considerations.’’ O’Hagan, 521 U.S. at and Huber contend that (5) the district 678 n.25, 117 S.Ct. 2199. ‘‘The Federal court erred in giving a conscious avoidance Criminal Code is replete with provisions jury instruction. We address each of these that criminalize overlapping conduct,’’ and arguments in turn. so ‘‘[t]he mere fact that two federal crimi- nal statutes criminalize similar conduct 1. ‘‘Serious Interference’’ says little about the scope of either.’’ Pas- [22] Defendants first argue that there quantino, 544 U.S. at 358 n.4, 125 S.Ct. was insufficient evidence at trial to prove 1766. Congress was certainly authorized to conversion of U.S. property because the enact a broader securities fraud provision, government presented no evidence that and it is not the place of courts to check Defendants interfered, let alone ‘‘seriously that decision on policy grounds. interfered,’’ with CMS’s ability to use its Accordingly, we hold that the personal- confidential information in the rulemaking benefit test does not apply to the wire process. Although the government agrees fraud and Title 18 securities fraud stat- that ‘‘serious interference’’ is required, it utes, and thus the district court did not err responds that ‘‘the interference is complete by refusing to instruct the jury on the when the [confidential] information is dis- personal-benefit test for those offenses. closed, and the interference is serious when the government has demonstrated a C. Conversion of U.S. Property strong interest in maintaining confidential- [21] The federal conversion statute ity of that species of information.’’2 Appel- proscribes ‘‘knowingly convert[ing] to lee’s Br. at 109.

2. Because there is no dispute here, we as- held, consistent with the common-law defini- sume without deciding that the conversion tion of conversion, that a ‘‘serious interfer- statute requires a ‘‘serious interference’’ with ence’’ is required. See United States v. Collins, property. It is worth noting that although this 56 F.3d 1416, 1420 (D.C. Cir. 1995) (‘‘The court has yet to decide this issue, all of our cornerstone of conversion is the unauthorized sister Circuits to address the question have exercise of control over property in such a

Pet. App. 19 38 947 FEDERAL REPORTER, 3d SERIES

[23] We disagree with Defendants’ consistent with the Restatement, which view of how the ‘‘serious interference’’ sets forth a multi-factor test for determin- standard applies when, as here, the prop- ing the ‘‘seriousness of the interference’’ erty at issue is confidential information. By that lists ‘‘the harm done to the [proper- focusing on the fact that their misappropri- ty]’’ and ‘‘the inconvenience and expense ation of confidential CMS information did caused to the [property owner]’’ as only not ultimately affect the rules that CMS two of six non-exhaustive factors, none of subsequently announced, Defendants dis- which ‘‘is always predominant.’’ Restate- regard the Supreme Court’s teaching in ment (Second) of Torts § 222A(2) & cmt. d Morissette v. United States that conver- (1965) (hereinafter ‘‘Restatement’’); see sion under Section 641 extends broadly to also United States v. Collins, 56 F.3d 1416, the ‘‘misuse or abuse of [government] 1420 (D.C. Cir. 1995) (citing the Restate- property.’’ 342 U.S. 246, 272, 72 S.Ct. 240, ment to interpret Section 641); United 96 L.Ed. 288 (1952). Moreover, Defen- States v. May, 625 F.2d 186, 192 (8th Cir. dants’ argument overlooks the fact that 1980) (same). Moreover, Defendants’ view the unauthorized disclosure of CMS’s con- is also in stark tension with our holding in fidential nonpublic information by defini- Girard, where we upheld the defendants’ tion interferes with the agency’s right to convictions under Section 641 for engaging exclude the public from accessing such in- in a scheme to sell confidential DEA infor- formation. See Carpenter, 484 U.S. at 26, mation that identified the agency’s infor- 108 S.Ct. 316 (rejecting the defendants’ mants, even though the scheme was unsuc- argument that they ‘‘did not interfere with cessful and there was no suggestion that the Journal’s use of the [pre-publication] the informants were in fact compromised. information’’ as ‘‘miss[ing] the point,’’ be- 601 F.2d at 70, 73; see also Morissette, 342 cause it sufficed that the defendants inter- U.S. at 272, 72 S.Ct. 240 (explaining that fered with the Journal’s ‘‘right to decide ‘‘merely TTT commingling’’ money may how to use [the information] prior to dis- constitute conversion where the custodian closing it to the public’’). Thus, we agree is ‘‘under a duty to keep it separate and with the government that the relevant ‘‘in- intact’’). terference’’ with CMS’s ownership of confi- [25] Thus, while the jury in this case dential information was complete upon the was free to consider the fact that CMS was unauthorized disclosure. able to use the misappropriated informa- [24] As for the ‘‘seriousness’’ of the tion and did not suffer any monetary loss, interference, we also reject Defendants’ it was also free to consider other factors, contention that their misappropriation of including (1) the strength of the govern- confidential CMS information exceeded the ment’s interest in maintaining confidential- reach of the conversion statute simply be- ity, (2) the risk of harm to the govern- cause CMS was able to keep using the ment’s interests posed by the unauthorized information. Defendants’ argument is in- disclosure, and (3) the extent of the unau-

manner that serious interference with owner- sion statute, which was intended to broaden ship rights occurs.’’); United States v. Scott, the scope of the common-law crime, see Col- 789 F.2d 795, 798 (9th Cir. 1986) (similar); lins, 56 F.3d at 1419, certainly evidence suffi- United States v. May, 625 F.2d 186, 192 (8th cient to establish ‘‘serious interference’’ under Cir. 1980) (similar); see also Restatement the common law would, at a minimum, also (Second) of Torts § 222A (1965). Although be sufficient to establish the requisite interfer- arguably a lesser quantum of interference ence required for conversion under Section might be required under the federal conver- 641.

Pet. App. 20 U.S. v. BLASZCZAK 39 Cite as 947 F.3d 19 (2nd Cir. 2019) thorized disclosure. See Restatement tion not only to hedge fund partners, who § 222A(2); see also, e.g., Girard, 601 F.2d sought to use the information for trading at 70, 73. purposes, but also to employees of health- Applying this standard here, we con- care companies such as Amgen, a regulat- clude that there was sufficient evidence to ed entity that stood to benefit from the support the jury’s finding of serious inter- very informational asymmetry that the ference with CMS’s ownership of its confi- government’s confidentiality rules for pre- dential information. Dr. Blum testified that decisional information were designed to ‘‘[i]t’s a very strong precedent and a very prevent. Taken together, this evidence was strong principle that every stakeholder has sufficient to support a finding that Defen- the right to receive the materials [concern- dants’ misappropriation of CMS’s confiden- ing a rule] at the same time,’’ because the tial nonpublic information ‘‘seriously inter- ‘‘rule-making process is based upon the fered’’ with CMS’s ownership rights for notion that the entire public that can be purposes of the conversion statute. affected TTT ha[s] the right to comment’’ in a manner that is fair to all stakeholders. 2. ‘‘Thing of Value’’ App’x at 467. The leaking of predecisional [26, 27] Defendants next argue that information, Dr. Blum explained, could confidential information is not a ‘‘thing of thus tilt the playing field against interest value’’ within the meaning of the conver- groups (and the public) who were not yet sion statute. 18 U.S.C. § 641 (emphasis privy to the information, and also prema- added). But as this Court explained in turely ‘‘trigger powerful [lobbying] forces Girard, ‘‘[t]he word ‘thing’ notwithstand- to try and stop decisions.’’ Id. CMS em- ing, the phrase is generally construed to ployee Amy Bassano echoed these views in cover intangibles as well as tangibles.’’ 601 her testimony, while adding that CMS em- F.2d at 71 (collecting cases). Thus, ‘‘[a]l- ployees were more ‘‘wary of what [stake- though the content of a writing is an intan- holders were] going to be sharing’’ with gible, it is nonetheless a thing a value.’’ Id. the agency after predecisional information Contrary to Defendants’ strained reading had leaked. Id. at 767. This increased wari- of the case, we read Girard to hold that ness, combined with the agency’s tighten- confidential information can itself be a ing up of internal information-sharing pro- ‘‘thing of value’’ under Section 641. Id.; see tocols, ‘‘sometimes result[ed] in suboptimal also United States v. Matzkin, 14 F.3d [policy] outcomes.’’ Id. Furthermore, all of 1014, 1021 (4th Cir. 1994) (holding that these adverse effects harmed CMS eco- confidential information was a ‘‘thing of nomically by making the agency function value’’); United States v. Barger, 931 F.2d less efficiently. See supra pp. 33–34. 359, 368 (6th Cir. 1991) (citing, inter alia, As for other relevant factors, the jury Girard for the proposition that ‘‘informa- could reasonably infer that the disclosure tion itself is enough to meet the property of confidential information to a Washing- or ‘thing of value’ element of the statute.’’). ton D.C. consultant like Blaszczak – and Thus, whatever the merit of Defendants’ ultimately to Blaszczak’s clients – seriously textual argument, we are not at liberty to risked harming the government’s interests reconsider Girard here. See, e.g., Deem v. by threatening wider disclosure of the in- DiMella-Deem, 941 F.3d 618, 623 (2d Cir. formation to interested stakeholders. In- 2019) (‘‘[A] published panel decision is deed, the government presented evidence binding on future panels unless and until it that Blaszczak tipped confidential informa- is overruled by the Court en banc or by

Pet. App. 21 40 947 FEDERAL REPORTER, 3d SERIES the Supreme Court.’’ (internal quotation textual requirement here. Rather, we marks omitted)). agree with the Fourth Circuit that ‘‘the existence of a published regulation pro- 3. Vagueness scribing disclosure’’ is not ‘‘the exclusive [28, 29] Olan, Huber, and Blaszczak method of preventing vagueness.’’ Id.; see further argue that Section 641 is unconsti- also, e.g., id. at 975–76 (rejecting defen- tutionally vague as applied to them be- dants’ as-applied vagueness challenge in cause there was no rule or regulation mak- light of ‘‘legends restricting disclosure’’ on ing clear that Worrall’s disclosure of the converted documents, ‘‘[d]efendants’ CMS’s confidential information was ‘‘with- behavior,’’ and witnesses’ testimony at tri- 3 out authority.’’ This argument too lacks al that defendants ‘‘would have known that merit. the information was not to be disclosed’’); [30, 31] ‘‘Where, as here, we are not United States v. Jones, 677 F. Supp. 238, dealing with defendants’ exercise of a first 241 (S.D.N.Y. 1988) (‘‘Given the govern- amendment freedom, we should not search ment’s long[-]standing practice of main- for statutory vagueness that did not exist taining the confidentiality of information for the defendants themselves.’’ Girard, relevant to on-going criminal investiga- 601 F.2d at 71; see also United States v. tions, and given the government’s obvious Mazurie, 419 U.S. 544, 550, 95 S.Ct. 710, interest in maintaining such confidentiali- 42 L.Ed.2d 706 (1975) (‘‘[V]agueness chal- ty, the defendant could reasonably know lenges to statutes which do not involve the proscribed nature of his alleged ac- First Amendment freedoms must be ex- tions.’’). amined in the light of the facts of the case at hand.’’). In Girard, we held that ‘‘statu- Here, as in Girard, there was ample tory vagueness TTT did not exist for the evidence at trial to establish that Defen- defendants themselves’’ because the defen- dants ‘‘must have known’’ that the disclo- dants ‘‘must have known’’ that the disclo- sure of the predecisional CMS information sure of the identity of DEA informants at issue was prohibited. Although Worrall was unauthorized. 601 F.2d at 71. Al- does not raise a vagueness challenge him- though we noted that the ‘‘DEA’s own self, it bears noting that CMS employees rules and regulations forbidding such dis- were subject to 5 C.F.R. § 2635.703(a) (the closure’’ were relevant to the inquiry, id., text of which was introduced into evidence we did not, contrary to Defendants’ sug- at trial), which forbids the ‘‘improper use gestion, require the existence of a publish- of nonpublic information to further [the ed rule or regulation on point. See United employee’s] own private interest or that of States v. McAusland, 979 F.2d 970, 975 another TTT by knowing unauthorized dis- (4th Cir. 1992) (‘‘We do not read [Girard] closure.’’ The regulation further provides as requiring the disclosure to be specifical- that ‘‘nonpublic information is information ly proscribed by published regulations.’’). that the employee gains by reason of Fed- Nor will we impose such a sweeping extra- eral employment and that he knows or

3. The phrase ‘‘without authority’’ in Section conversion. See Restatement § 228 (‘‘One who 641 modifies only the words that follow it, is authorized to make a particular use of a ‘‘sells, conveys, or disposes,’’ not the words chattel, and uses it in a manner exceeding the preceding it, ‘‘embezzles, steals, purloins, or authorization, is subject to liability for conver- knowingly converts.’’ 18 U.S.C. § 641. Never- sion to another whose right to control the use theless, in this context, the ‘‘without authori- of the chattel is thereby seriously violated.’’). ty’’ requirement is implied by the definition of

Pet. App. 22 U.S. v. BLASZCZAK 41 Cite as 947 F.3d 19 (2nd Cir. 2019)

reasonably should know has not been to establish that Olan, Huber, and Blaszc- made available to the general public.’’ Id. zak knew that the CMS information at § 2635.703(b). In addition, CMS employees issue was disclosed ‘‘without authority.’’ received extensive training on the rules Accordingly, their as-applied vagueness prohibiting disclosure of nonpublic predeci- challenge fails. sional information. As a former employee, Blaszczak was 4. Scienter previously subject to these same rules and [32] Olan and Huber next argue that presumably had also received training on there was insufficient evidence at trial to the confidential nature of predecisional in- establish that they received confidential formation. At trial, moreover, the govern- CMS information ‘‘knowing it to have been ment’s witnesses consistently testified to TTT converted,’’ as required by 18 U.S.C. the fact that Blaszczak, Olan, and Huber – § 641. Blaszczak similarly argues that the and consultants and securities traders in evidence was insufficient to prove his ‘‘in- the healthcare space more generally – tent to convert [such information] to his knew that predecisional CMS information use or gain.’’ Id. Again, we disagree, and was nonpublic and confidential. Indeed, find that the evidence at trial was suffi- Fogel testified that the Deerfield defen- cient to establish Olan’s and Huber’s dants valued predecisional CMS informa- knowledge that they received converted tion precisely because it was not available property. to other traders. Plaford testified similarly Specifically, we reject, for the reasons as to his own motivations. just mentioned, Olan’s argument (joined by That testimony was corroborated by evi- Huber) that the evidence was insufficient dence of Defendants’ own communications to prove his knowledge of unauthorized and behavior. In one episode in 2012, for disclosure. We also reject Olan’s claim that example, Olan, Huber, Fogel, and Blaszc- the evidence was insufficient to prove his zak attempted to extract predecisional knowledge of ‘‘serious interference’’ with CMS information from CMS consultant CMS’s ownership of its confidential infor- Dr. Niles Rosen, prompting an email dis- mation. Despite Olan’s bald assertion that cussion of the fact that Rosen was unlikely ‘‘[t]here was no way for [him] TTT to know to disclose such information. Olan com- that disclosure of the information’’ could mented that he thought the odds of Blaszc- affect CMS’s rulemaking process given zak ‘‘getting shut down by [R]osen [were] that he had ‘‘never worked for CMS,’’ Olan 103%,’’ but nevertheless Blaszczak and the Br. at 45, fellow Deerfield partner Fogel – Deerfield partners pushed ahead in the who had also never worked for CMS – hopes that Blaszczak might get Rosen to testified that he understood that disclosure ‘‘bite[ ],’’ since he was ‘‘the man with the of CMS’s confidential information ‘‘had the keys to [the radiation-oncology device] potential to disrupt CMS’s process,’’ App’x companies’ coffins.’’ App’x at 1982, 2428. at 564. Indeed, Fogel specifically acknowl- Ultimately, Rosen rebuffed Blaszczak’s ef- edged that if CMS’s confidential ‘‘informa- forts, writing in an email, ‘‘As you clearly tion was out there, it would give industry understand, I cannot share with you our lobbyists and others a chance to TTT stop a recommendations to CMS.’’ Id. at 2431. proposed cut or increase from happening.’’ Thus, construing the evidence in the Id. Most notably, Fogel testified that he light most favorable to the prosecution, we ‘‘discuss[ed] th[e] impact on the CMS pro- conclude that there was sufficient evidence cess’’ with Huber and Olan. Id. This de-

Pet. App. 23 42 947 FEDERAL REPORTER, 3d SERIES tailed testimony alone was enough to es- (internal quotation marks omitted). This tablish Huber’s and Olan’s knowledge of standard is easily satisfied here. To repeat, serious interference. See United States v. the evidence at trial established that Olan Hamilton, 334 F.3d 170, 179 (2d Cir. 2003) and Huber sought out Blaszczak’s services (‘‘The testimony of a single accomplice is precisely so they could trade on informa- sufficient to sustain a conviction so long as tion that other analysts and consultants that testimony is not incredible on its face did not possess. And as Fogel testified, and is capable of establishing guilt beyond when Blaszczak gave the Deerfield part- a reasonable doubt.’’ (internal quotation ners the nonpublic information they marks omitted)). sought, he either told them ‘‘explicitly’’ that it came from CMS insiders, or that [33] As to Blaszczak’s sufficiency chal- fact was ‘‘implied or obvious’’ given the lenge, there was ample evidence to support context in which the information was con- a finding that Blaszczak intended to con- veyed. App’x at 555. In addition, Fogel vert the confidential CMS information that testified that he, Olan, and Huber specifi- he received from CMS insiders to his use cally discussed the fact that disclosure of or gain. Although Blaszczak argues that CMS’s confidential predecisional informa- there was insufficient evidence to establish tion could harm the agency’s regulatory that he specifically ‘‘intend[ed] [for] his process. In these circumstances, a rational predictions and analyses TTT to interfere juror could find that, even if Olan and TTT with CMS’s work,’’ Blaszczak Br. at Huber did not have actual knowledge that 57, the requisite intent was established by Blaszczak’s predictions were based on con- evidence that Blaszczak, himself a former fidential CMS information that had been CMS employee, obviously knew that the converted, Olan and Huber were at least disclosure of the predecisional CMS infor- aware of a high probability of that fact and mation he received was unauthorized and yet consciously avoided confirming it. could spawn interference with CMS’s pro- cesses, but he nevertheless intentionally proceeded to appropriate such information D. Other Sufficiency Arguments to his own use by disclosing it to his hedge Blaszczak, joined by Olan and Huber, fund clients. See Morissette, 342 U.S. at next argues that at most the evidence es- 270–72, 72 S.Ct. 240. tablished that he passed along information that was already public, or that was dis- 5. Conscious Avoidance Instruction closed by CMS insiders who had the au- [34, 35] Last, we reject Olan’s and Hu- thority to disclose it. This argument is ber’s claim that the district court erred in meritless. The fact that Blaszczak had ac- giving a ‘‘conscious avoidance’’ instruction. cess to legitimate sources of information As relevant here, a conscious avoidance that could have supported his predictions instruction may only be given if ‘‘the ap- hardly compels the conclusion that he in propriate factual predicate for the charge fact relied on those sources, rather than on exists, i.e. the evidence is such that a CMS insiders who disclosed confidential rational juror may reach the conclusion information without authority, as Fogel beyond a reasonable doubt that the defen- and Plaford testified. And while Blaszczak dant was aware of a high probability of the makes much of the fact that his predictions fact in dispute and consciously avoided were not always accurate, his lack of per- confirming that fact.’’ United States v. Gof- fection does not compel an inference that fer, 721 F.3d 113, 126–27 (2d Cir. 2013) his sources were legitimate and public. As

Pet. App. 24 U.S. v. BLASZCZAK 43 Cite as 947 F.3d 19 (2nd Cir. 2019) the evidence reflected, there were various who recalled that Blaszczak had specifical- reasons why CMS might adjust its position ly named Worrall as a source of confiden- between the time that confidential predeci- tial CMS information. The government sional information leaked and the time that also presented evidence that Blaszczak and a rule was publicly announced. Moreover, Worrall remained close in 2013 and 2014; despite Blaszczak’s imperfect record, his for example, Blaszczak’s research analyst predictions were still more accurate (and during that period, Timothy Epple, testi- valuable) than those of other market con- fied that Blaszczak ‘‘would reference his sultants. Put simply, Blaszczak invites us friend Chris most often’’ as his source of to choose ‘‘between competing inferences,’’ nonpublic CMS information. App’x at 872. but this is a fact-finding function that lies Epple further testified that, after Blaszc- ‘‘solely within the province of the jury.’’ zak learned he was under investigation by United States v. Payne, 591 F.3d 46, 60 the SEC, he pointedly asked Worrall (2d Cir. 2010). whether investigators had been question- [36] For similar reasons, we reject ing people at CMS. While Worrall argues Worrall’s argument that the evidence was that Blaszczak could nevertheless have ob- insufficient to establish that he was the tained information about the 2012 radia- source of leaked CMS information in 2012. tion oncology rule from other people at Contrary to Worrall’s suggestion, the gov- CMS, the above-referenced evidence was ernment was not required to prove the more than sufficient to support the jury’s precise way in which he became aware of contrary finding on this point. predecisional information concerning the Thus, having carefully reviewed the rec- proposed radiation oncology rule. Rather, ord, we conclude that the evidence at trial the government was entitled to prove Wor- was sufficient to support the jury’s verdict rall’s knowledge of the information on each count of conviction.4 through circumstantial evidence, including evidence that Worrall had access to the E. Misjoinder information because he worked closely [37] Olan and Huber next argue that with Blum and his job responsibilities ex- the district court erred in denying their posed him to various matters within the motion under Federal Rule of Criminal agency. As to whether Worrall disclosed Procedure 8(b) to sever Counts Seventeen this information to Blaszczak, the govern- and Eighteen, which charged Blaszczak ment introduced into evidence a May 8, alone in the Visium scheme, from the re- 2012 CMS sign-in sheet establishing that maining counts. Blaszczak met Worrall the day before re- laying confidential information concerning [38–40] Rule 8(b) provides that an in- the proposed radiation oncology rule to dictment ‘‘may charge [two] or more de- Fogel. This evidence was buttressed by fendants if they are alleged to have partici- testimony from Marc Samuels, Blaszczak’s pated in the same act or transaction, or in consulting partner between 2008 and 2012, the same series of acts or transactions,

4. Because each of the conspiracy convictions ‘‘obstruct[ing] a lawful function of the Gov- was predicated on substantive counts for ernment TTT by deceitful or dishonest means.’’ which there was sufficient evidence, we need United States v. Coplan, 703 F.3d 46, 61 (2d not reach the issue of whether there was also Cir. 2012) (internal quotation marks omitted); sufficient evidence to support so-called see United States v. Desnoyers, 637 F.3d 105, ‘‘Klein’’ conspiracies to defraud the United 109–10 (2d Cir. 2011); United States v. Coria- States, in violation of 18 U.S.C. § 371, by ty, 300 F.3d 244, 250 (2d Cir. 2002).

Pet. App. 25 44 947 FEDERAL REPORTER, 3d SERIES constituting an offense or offenses.’’ Fed. [41] In any event, even if joinder were R. Crim. P. 8(b). Under this rule, ‘‘joinder improper, any error would be harmless of defendants is proper when the alleged because much of the evidence relating to acts are ‘unified by some substantial iden- the Visium scheme would have been ad- tity of facts or participants, or arise out of missible against Olan and Huber on a common plan or scheme.’ ’’ United States Counts One through Sixteen. See Shellef, v. Feyrer, 333 F.3d 110, 114 (2d Cir. 2003) 507 F.3d at 101–02. The district court cor- (quoting United States v. Attanasio, 870 rectly determined that Plaford’s testimony, F.2d 809, 815 (2d Cir. 1989)). In adminis- which both corroborated Fogel’s testimony tering this standard, we ‘‘apply a ‘common- and provided useful background on Blaszc- sense rule’ to decide whether, in light of zak’s methods and sources during the the factual overlap among charges, joint same time period as the Deerfield conspir- proceedings would produce sufficient effi- acy, was relevant evidence on the charges ciencies such that joinder is proper not- against Olan and Huber. See Fed. R. Evid. withstanding the possibility of prejudice to 401; see also id. 404(b). While the court either or both of the defendants resulting also recognized that the probative value of from the joinder.’’ United States v. Ritt- Plaford’s testimony ‘‘may [have been] weger, 524 F.3d 171, 177 (2d Cir. 2008) somewhat attenuated’’ in relation to the (Sotomayor, J.) (quoting Shellef, 507 F.3d Deerfield scheme, the court permissibly at 96). Even where joinder is erroneous, concluded that such testimony would not we will not reverse unless the ‘‘misjoinder result in any undue prejudice for purposes results in actual prejudice because it had of Rule 403(b). App’x at 996; see United [a] substantial and injurious effect or influ- States v. Awadallah, 436 F.3d 125, 134 (2d ence in determining the jury’s verdict.’’ Cir. 2006) (‘‘Only rarely – and in extraordi- Shellef, 507 F.3d at 100 (internal quotation narily compelling circumstances – will we, marks omitted). from the vista of a cold appellate record, reverse a district court’s on-the-spot judg- Here, the district court did not err in ment concerning the relative weighing of concluding that the Visium-related charges probative value and unfair effect.’’ (inter- against Blaszczak were properly joined nal quotation marks omitted)). with the Deerfield-related charges against Blaszczak, Olan, Huber, and Worrall. Al- F. Evidentiary Issues though these two sets of charges involved distinct schemes, there was substantial [42–45] Blaszczak, again joined by temporal overlap between the Visium Olan and Huber, also argues that the dis- scheme (2011 to 2013) and Deerfield trict court committed several evidentiary scheme (mainly 2012 to 2014); the schemes errors warranting a new trial. Specifically, involved nearly identical conduct, i.e., mis- Blaszczak contends that the district court appropriation and insider trading of confi- erred by (1) limiting as cumulative the dential government information concerning defense’s cross-examination of CMS em- healthcare rules; and in both schemes, ployee Mark Hartstein concerning the fact Blaszczak was the key player and CMS that CMS’s 2012 proposed radiation oncol- was the victim. These similarities alone ogy rule was based on published recom- were sufficient to render Rule 8(b) joinder mendations of the American College for both efficient and proper. See Rittweger, Radiology; (2) precluding cross-examina- 524 F.3d at 177; Feyrer, 333 F.3d at 114; tion of Plaford as to a prior inconsistent Attanasio, 870 F.2d at 815. statement; (3) admitting into evidence

Pet. App. 26 U.S. v. BLASZCZAK 45 Cite as 947 F.3d 19 (2nd Cir. 2019)

statements made by Amgen employee these rulings were erroneous, any errors Ruth Hoffman under the coconspirator ex- would fall well short of prejudicial. Over clusion set forth in Rule 801(d)(2)(E); and the course of the month-long trial, the (4) admitting into evidence minutes of a government presented various forms of ev- 2007 Deerfield meeting as a business rec- idence establishing that Blaszczak’s predic- ord for the purpose of proving Olan’s and tions were based on confidential nonpublic Huber’s states of mind. CMS information obtained directly from CMS insiders, and that Olan and Huber Having considered these arguments in were aware of that fact when they sought the context of the record as a whole, we out this information, received it, and di- discern no error warranting a new trial. rected Deerfield to trade on it. The district court acted within its discre- tion in limiting Hartstein’s testimony as to IV. CONCLUSION the basis for CMS’s proposed radiation In upholding the jury’s verdict, we pause oncology rule, since other evidence had to reject Defendants’ thematic claim that indeed been introduced on this subject and the government’s positions, if accepted, Hartstein’s testimony would have been cu- would herald an unprecedented expansion mulative. Regarding Plaford’s prior incon- of federal criminal law. It is Defendants sistent statement that the market’s predic- who ask us to break new ground by reject- tion for the home healthcare cuts was 2.5% ing well-recognized theories of property rather than 3.5% as he recalled at trial, the rights and by adding, in effect, a ‘‘personal district court did not err in concluding that benefit’’ element to the Title 18 fraud stat- Plaford’s recollection as to the actual mar- utes. We decline these requests, holding ket consensus was a collateral issue. As for instead that (1) a government agency’s Hoffman’s email statements, the evidence confidential information relating to its con- at trial was sufficient to establish Hoff- templated rules may constitute ‘‘property’’ man’s status as an unindicted coconspira- for purposes of the wire fraud and Title 18 tor for purposes of Rule 801(d)(2)(E) based securities fraud statutes, and (2) Dirks’s on her implied agreement with Blaszczak ‘‘personal-benefit’’ framework does not ap- to misappropriate confidential CMS infor- ply to these Title 18 fraud statutes. Our mation. See, e.g., United States v. Down- remaining holdings confirm that Defen- ing, 297 F.3d 52, 57–58 (2d Cir. 2002). dants’ misappropriation of CMS’s predeci- Finally, the district court properly admit- sional information, as proven at trial, fall ted the minutes of the 2007 Deerfield comfortably within the Title 18 securities meeting – reflecting that someone at the fraud, wire fraud, conversion, and conspir- acy statutes. To the extent that the gov- meeting had opined that ‘‘Blazacks [sic] ernment’s decision to prosecute any or all comments pre-news suggest he had a read of these crimes in this case raises broader of draft documents,’’ App’x at 2039 – as a enforcement policy concerns, that is a mat- business record probative of Olan’s and ter for Congress and the Executive, not Huber’s states of mind during the years of the Judiciary. Our inquiry is a more limit- the charged conspiracy, see Fed. R. Evid. ed one, and having now completed it, we 803(6), and subject to a clear limiting in- AFFIRM the judgments of the district struction that such evidence could not be court. considered against Blaszczak. We therefore discern no error in the KEARSE, Circuit Judge, dissenting: district court’s evidentiary rulings. More- I respectfully dissent from the majori- over, even assuming that one or more of ty’s affirmance of the convictions of these

Pet. App. 27 46 947 FEDERAL REPORTER, 3d SERIES four defendants for substantive crimes of (2) to obtain, by means of false or conversion of government property in vio- fraudulent pretenses, representations, lation of 18 U.S.C. § 641 and wire fraud in or promises, any money or property in violation of 18 U.S.C. § 1343, as well as the connection with the purchase or sale convictions of three of the defendants for of TTT any security of an issuer with a substantive crimes of securities fraud in class of securities registered under violation of 18 U.S.C. § 1348, for conspira- Section 12 of the Securities Exchange cy in violation of 18 U.S.C. § 1349 to Act of 1934 TTTT commit Title 18 crimes of wire fraud and shall be fined under this title or impris- securities fraud, and for conspiracy in vio- oned not more than 25 years, or both. lation of 18 U.S.C. § 371 to commit of- 18 U.S.C. § 1348(2) (emphases added). fenses under § 641 and other provisions, With respect to the issue dividing us, the including Title 15 securities fraud in viola- majority treats the relevant elements of tion of 15 U.S.C. § 78j(b) and SEC Rule §§ 1343 and 1348 as the same: the proper- 10b-5 promulgated thereunder. ty that the defendant is charged with ob- Section 641, one of the sections under taining by false or fraudulent pretenses which all four defendants were convicted, must be the property of the defrauded provides that it is unlawful to victim. While this has been held to be so embezzle[ ], steal[ ], purloin[ ], or know- with respect to the mail fraud statute, 18 ingly convert[ ] to his use or the use of U.S.C. § 1341, see, e.g., Cleveland v. Unit- another, or without authority, sell[ ], ed States, 531 U.S. 12, 15, 121 S.Ct. 365, convey[ ] or dispose[ ] of any record, 148 L.Ed.2d 221 (2000) (‘‘the thing ob- voucher, money, or thing of value of the tained must be property in the hands of United States or of any department or the [fraud] victim’’), and §§ 1341 and 1343 agency thereof TTTT ‘‘share the same language in relevant part’’ and are subject to the same analysis, Car- 18 U.S.C. § 641 (emphases added). Section penter v. United States, 484 U.S. 19, 25 1343, under which all four defendants were n.6, 108 S.Ct. 316, 98 L.Ed.2d 275 (1987), it also convicted, provides in part that is not entirely clear to me that this is true [w]hoever, having devised or intend- of § 1348. However, for purposes of this TTT ing to devise any scheme or artifice opinion, I accept that both §§ 1343 and for obtaining money or property by 1348 prohibit obtaining property belonging means of false or fraudulent pretenses to the victim of the fraud. TTT transmits or causes to be transmit- My disagreement with the majority is ted by means of wire TTT any writings, focused on the charges of the operative signs, signals TTT for the purpose of superseding indictment (‘‘Indictment’’) that executing such scheme or artifice, shall defendants violated §§ 1343 and 1348 by be fined under this title or imprisoned obtaining something that was government not more than 20 years, or both. ‘‘property’’ and violated § 641 by ‘‘convert- 18 U.S.C. § 1343 (emphases added). Sec- ing’’ something that was a ‘‘thing of value’’ tion 1348, under which three defendants to the government. were convicted, is similar to § 1343. It The alleged conduct underlying virtually provides in part that all of these charges was that defendants [w]hoever knowingly executes, or at- Blaszczak, Huber, and Olan obtained di- tempts to execute, a scheme or artifice-- rectly or indirectly from defendant Wor- TTTT rall, an employee of the federal agency

Pet. App. 28 U.S. v. BLASZCZAK 47 Cite as 947 F.3d 19 (2nd Cir. 2019)

Centers for Medicare & Medicaid Services Cir. 1979), as compelling the conclusion (‘‘CMS’’), confidential information as to the that CMS’s desire for predecisional confi- substance and timing of upcoming changes dentiality is a thing of value, I disagree. to CMS rules governing reimbursement Girard involved a drug dealer’s attempt rates for certain medical treatments. CMS to purchase confidential records of the is not a business; it does not sell, or offer United States Drug Enforcement Admin- for sale, a service or a product; it is a istration (‘‘DEA’’) as to what persons regulatory agency. It adopts regulations were DEA informants. Confidential infor- that affect, inter alia, business organiza- mation as to the identities of informants tions or health industry entities--whether and cooperators is clearly ‘‘[some]thing of the affected persons or entities favor the value’’ to a government agency whose regulations or not. While CMS seeks to mission is law enforcement. That confi- maintain confidentiality as to its planned dential information has inherent value be- regulations--and the regulations can plain- cause it enables the agency to, inter alia, ly have either a favorable or an adverse collect evidence upon which the Depart- effect on certain business entities’ for- ment of Justice may obtain authorizations tunes--I do not view a planned CMS regu- to conduct electronic surveillance, obtain lation as a ‘‘thing of value’’ to CMS, 18 warrants for arrests, and commence pros- U.S.C. § 641, that is susceptible to conver- ecutions. Confidentiality in that context sion. Unlike the information that was enhances the value of the information be- planned for publication by the news pub- cause, inter alia, it reduces the chances lisher victim in Carpenter, information is that suspects will alter their observable not CMS’s ‘‘stock in trade,’’ 484 U.S. at 26, behavior, hide their contraband, flee into 108 S.Ct. 316 (internal quotation marks hiding, or tamper with--or harm--wit- omitted). CMS does not seek buyers or nesses before the law enforcement agency subscribers; it is not in a competition; it is has an opportunity to fully act upon the an agency of the government that regu- information it possesses. lates the conduct of others. It does so whether or not any information on which An agency such as CMS whose brief is its regulation is premised is confidential. to issue regulations is entirely different. It Further, regardless of whether informa- may either carry out or deviate from its tion as to the substance or timing of a planned adoption of regulations even if its planned regulation remains confidential as plans, and/or the information that affects CMS prefers or is disclosed to unautho- those plans, become public knowledge be- rized listeners, CMS adopts its preferred fore CMS prefers that such disclosures planned regulation and--subject to legal occur. There has been no conversion. requirements as to timing, e.g., 42 U.S.C. For similar reasons, I do not view § 1395w-4(b)(1) (requiring that reimburse- CMS’s interest in issuing a regulation, or ment rates for a given year be announced in doing so on a particular date, or in prior to November 1 of the preceding keeping the planned regulation a secret year)--can do so in accordance with its own until its issuance, as constituting govern- timetable. I cannot see that predecisional ment ‘‘property’’ within the meaning of regulatory information is subject to con- §§ 1343 and 1348. Given that CMS, not- version within the contemplation of § 641. withstanding any premature disclosure of Although the majority views our deci- its predecisional regulatory information, sion upholding a § 641 conviction in Unit- can issue a regulation that adheres to its ed States v. Girard, 601 F.2d 69, 71 (2d preliminary inclination or can issue a dif-

Pet. App. 29 48 947 FEDERAL REPORTER, 3d SERIES

ferent regulation, I cannot see that CMS adopt. Thus, I cannot agree that a prema- has been deprived of anything that could ture disclosure of predecisional regulatory be considered property. information has taken any property from Nor do I see merit in the government’s CMS or the government. contention that predecisional regulatory As the majority notes, all four defen- information should be considered govern- dants were acquitted on all of the counts ment property because CMS is ‘‘responsi- charging them with substantive securities ble for allocating $1 trillion in federal fraud violations of Title 15 and SEC Rule funds every year,’’ and that ‘‘[b]ecause a 10b-5 promulgated thereunder. The only large part of’’ CMS’s ‘‘mission’’ to ‘‘devel- substantive counts on which the jury found op[ ] and maintain[ ] effective health care any defendant guilty were those charging policy TTTT is centered on cost-effective violations of 18 U.S.C. §§ 641, 1343, and allocation of health care spending, interfer- 1348. Since, in my view, the predecisional ence with CMS’s right to exclusive use of regulatory information at issue here did its confidential information necessarily cre- not constitute CMS property within the ates the potential for significant economic meaning of §§ 1343 and 1348, or a thing of consequences’’ (Government brief on ap- value stolen from CMS in violation of peal at 92). Whatever economic conse- § 641, none of defendants’ convictions on quences actually occur will be based on substantive counts should stand. what CMS actually decides as to the sub- The Indictment also contained three stance and the timing of the regulation it conspiracy counts: Counts 1 and 2 against adopts. The Cleveland Court rejected the all four defendants (on both of which Wor- government’s argument that a property rall was acquitted), and Count 17 against right of the State of Louisiana had been Blaszczak alone. Count 2 charged all de- interfered with because the defendant fendants with violating 18 U.S.C. § 1349, ‘‘frustrated the State’s right to control the which prohibits conspiracy ‘‘to commit any issuance’’ of gaming licenses. 531 U.S. at offense under this chapter,’’ to wit, Chap- 23, 121 S.Ct. 365. The Court held that ter 63 of Title 18, i.e., 18 U.S.C. §§ 1341- ‘‘these intangible rights of allocation, ex- 1351. Count 17 charged Blaszczak with clusion, and control amount to no more violating 18 U.S.C. § 371 by conspiring and no less than Louisiana’s sovereign with a cooperating coconspirator to violate power to regulate.’’ Id. § 641. Since in my view the Indictment’s Like the gaming licenses in question in allegations of substantive violations of Cleveland, which the State had the right to §§ 1343, 1348, and 641 charged defendants control or withhold--but which had no only with conduct that was not prohibited property status or effect until they were by those sections, defendants could not issued (and even when issued were not the properly be convicted of conspiring to vio- property of the State)--the predecisional late them. Thus, I would conclude that the CMS information has no economic impact convictions on Counts 2 and 17 should also on the government until after CMS has be reversed. actually decided what regulation to issue The conspiracy charged in Count 1, how- and when the regulation will take effect. ever, was not limited to a conspiracy to And at the point when the regulation has violate §§ 641, 1343, and 1348. Count 1 economic impact on the government fisc, (Indictment ¶¶ 1-76) charged defendants its impact will be in accordance with what- with agreeing to commit ‘‘conversion of ever regulation CMS ultimately decided to United States property, in violation of Ti-

Pet. App. 30 U.S. v. BELL 49 Cite as 947 F.3d 49 (3rd Cir. 2020)

tle 18, United States Code, Section 641; (prosecution for conduct beyond statute-of- securities fraud, in violation of Title 15, limitations period invalid as a matter of United States Code, Sections 78j(b) and law), partially overruled on other grounds 78ff, and Title 17, Code of Federal Regula- by Burks v. United States, 437 U.S. 1, 7- tions, Section 240.10b-5; and to defraud the 10, 98 S.Ct. 2141, 57 L.Ed.2d 1 (1978); see United States and an agency thereof, to generally Griffin v. United States, 502 wit, CMS, in violation of Title 18, United U.S. 46, 52-56, 112 S.Ct. 466, 116 L.Ed.2d States Code, Section 371 and Title 5, Code 371 (1991). While the mere insufficiency of of Federal Regulations, Section the evidence to support one of the bases 2635.703(a).’’ (Indictment ¶ 72 (emphases submitted to the jury does not fall within added)). The latter Code of Federal Regu- this principle, see id. at 56, 112 S.Ct. 466, a lations provision states in part that ‘‘[a]n basis is invalid as a matter of law when the employee shall not TTT allow the improper conduct in question ‘‘fails to come within use of nonpublic information to further the statutory definition of the crime,’’ id. his own private interest or that of another at 59, 112 S.Ct. 466. TTT by knowing unauthorized disclosure.’’ As the jury could have found that the 5 C.F.R. § 2635.703(a) (emphases added). three defendants it convicted under Count Count 1 alleged that defendants agreed to, 1 agreed to commit crimes prohibited by inter alia, defraud CMS by obtaining from its employee Worrall confidential informa- Title 15 and the regulations promulgated tion about CMS’s predecisional regulatory under that Title, but may instead have information (see Indictment ¶ 75) and en- found only that they agreed to engage in gage in purchases and sales of securities in conduct that was alleged to violate 18 violation of 15 U.S.C. § 78j(b) and 78ff (see U.S.C. § 641, 1343, or 1348 but that did not id. ¶ 74), and that pursuant to their con- come within the definitions of those sec- spiracy certain overt acts, including short tions, the convictions of Blaszczak, Huber, sales of the shares of specified companies, and Olan on Count 1 should be vacated. were committed, all in violation of 18 Accordingly, I respectfully dissent. U.S.C. § 371 (see id. ¶ 76). The defendants other than Worrall were found guilty on this count. The jury was , not given questions to answer that would reveal, with respect to Count 1, whether it found that the three convicted defendants had conspired to violate the securities UNITED STATES of America fraud provisions of Title 15 and SEC Rule v. 10b-5 promulgated under that Title or to violate a government employee’s duty of Marquise BELL, Appellant confidentiality, or instead had only con- No: 17-3792 spired to violate § 641. When, as here, the jury has been presented with several bases United States Court of Appeals, for conviction, one or more of which is Third Circuit. invalid as a matter of law, and it is impos- Argued September 25, 2018 sible to tell which ground the jury select- ed, the conviction should be vacated. See, (Opinion Filed: January 7, 2020) e.g., Yates v. United States, 354 U.S. 298, Background: Defendant was convicted, 312, 77 S.Ct. 1064, 1 L.Ed.2d 1356 (1957) on guilty plea entered in the United States

Pet. App. 31 Case 18-2811, Document 315, 04/10/2020, 2817724, Page1 of 1

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT ______

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 10th day of April, two thousand twenty.

______

United States of America,

Appellee,

v. ORDER

David Blaszczak, Theodore Huber, Robert Olan, Docket Nos: 18-2811 (Lead) Christopher Worrall, 18-2825 (Con) 18-2867 (Con) Defendants-Appellants. 18-2878 (Con) ______

Appellants, Theodore Huber and Robert Olan, filed a petition for panel rehearing, or, in the alternative, for rehearing en banc. The panel that determined the appeal has considered the request for panel rehearing, and the active members of the Court have considered the request for rehearing en banc.

IT IS HEREBY ORDERED that the petition is denied.

FOR THE COURT: Catherine O'Hagan Wolfe, Clerk

Pet. App. 32 Case 18-2811, Document 317, 04/10/2020, 2817901, Page1 of 1

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT ______

At a Stated Term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 10th day of April, two thousand twenty,

Before: Amalya L. Kearse, Richard J. Sullivan,

Circuit Judges.*

______

United States of America, ORDER Docket No. 18-2811(L), lllllllllllllllllllllAppellee, 18-2825(CON), 18-2867(CON), 18-2878(CON) v.

David Blaszczak, Theodore Huber, Robert Olan, Christopher Worrall,

lllllllllllllllllllllDefendants-Appellants. ______

Appellant, David Blaszczak, having filed a petition for panel rehearing and the panel that determined the appeal having considered the request,

IT IS HEREBY ORDERED that the petition is DENIED.

For The Court: Catherine O'Hagan Wolfe, Clerk of Court

*Judge Christopher F. Droney, who was originally part of the panel assigned to hear this case, retired from the Court effective January 1, 2020.

Pet. App. 33