Moral Reasoning and Value Statements Assessment – Professional Code of Ethics Paper

Argument Paper

Case Study

For hedge funds, information is a valuable currency. A scrap of insight about a coming change in government policy can be as precious as any market data, potentially making the difference between a profit or loss on a trade. As a result, political intelligence firms have proliferated inside the Beltway.

The Washington consultant, Donald Bevalaqua is founder of one such firm, Vanguard Health Strategies. He was hired by Andover Management, a health care hedge fund firm to help them understand changes in government policy, and use this understanding in their investment strategies. 

The case concerns information Bevalaqua obtained for Andover about policy decisions made at the US Department of Health and Human Services, where Bevalaqua used to work. One of the agency’s divisions is The Centers for Medicare and Medicaid Services, which spend more than $1 trillion a year on health care programs for the elderly, disabled and lower income families and are major buyers of medical instruments, drugs and medical services.

Over the course of two years (2012 – 2014), Mr. Bevalaqua held several meetings with his friend and former colleague James Tomlinson, who is a senior staff member at the Centers for Medicare and Medicaid Services. The two also were in frequent contact through emails, telephone calls, meetings and text messages. In that time, Bevalaqua received material, nonpublic information about decisions made at the agency including potential changes in government policy and regulations for things such as radiation therapy and kidney dialysis and how these policies would affect publicly traded companies.

In an email Mr. Bevalaqua bragged to a partner at Andover about his superiority to a competitor, saying that competitor “doesn’t know anyone at cms. His guesses are just wild random guesses.”

Managers at Andover estimate that this information generated approximately $3.9 million in profits for Andover and its investors. Mr. Bevalaqua was paid $335,000 in consulting fees between 2012 and 2014. In September 2011, Mr. Bevalaqua introduced Mr. Tomlinson to a private health care policy firm, where he then interviewed for a job. He did not take the job but used it as leverage to get a $15,000 raise.

Mr. Bevalaqua and Mr. Tomlinson would exchange banter with clients about how much money they could make by collaborating. In one email exchange in 2014, Mr. Bevalaqua told Mr. Tomlinson that they would “kill it working together.”

Mr. Tomlinson responded: “You’re like gelato to me. Hard to resist. Lol. Let’s talk.”