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Feds accuse former CMS employee of leaking tips to investors

Most investors in Texas know that decisions made by government regulators sometimes influence profits at companies. This concept is the crux of a federal criminal case against a former employee of the Centers for Medicare and Medicaid Services. Officials say that he engaged in a form of insider trading when sharing government secrets, known as political intelligence, for the benefit of investors.

After leaving CMS, the defendant provided consulting services to hedge funds. According to prosecutors, he leveraged his relationship with a colleague still employed at CMS to gain information about changes to government payments for certain medical treatments. This inside information gave the managers of one fund a chance to earn over $3.5 million from stock trading. The hedge fund allegedly paid the defendant $832,000 for his consultations.

As this case heads for trial, it represents the federal government's first attempt to prosecute the activities of government intelligence firms. Instead of corporate secrets, the former government employees trade in government information obtained from their colleagues that are still working within federal agencies. The defense is expected to argue that the information shared was not secret and therefore not illegal to disclose to other parties.

A person facing prosecution in federal court might develop a defense strategy by consulting with an attorney familiar with federal crimes. Conviction on a federal charge could produce a lengthy prison sentence, and the representation of a lawyer could counteract aggressive prosecution. With legal assistance, an alleged offender may choose between going to trial or pursuing a plea bargain. An attorney could evaluate the evidence to gauge its strength. When evidence appears weak or not clearly associated with the person, legal counsel might argue for the reduction or dismissal of charges.

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