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Hedge Fund Trader Fined Over Illegal Tips on HCA Healthcare

Matt Robinson

(Bloomberg) -- A former hedge fund trader who did a stint at Citadel was fined by U.S. regulators for illicitly profiting from tips that the Affordable Care Act was a much bigger boon for HCA Healthcare Inc. than the company expected.

While working at Stelliam Investment Management, Michael Mindlin obtained non-public information in 2014 from an unnamed executive at HCA who had been a close friend for years, the Securities and Exchange Commission said in a Friday order. Mindlin, who didn’t admit or deny the allegations, agreed to pay $134,086 in penalties and agreed to an industry bar with the right to reapply after three years.

Mindlin was at Stelliam from 2009 to March 2016 and Citadel from June 2016 to June 2018, according to his LinkedIn page. Mindlin’s attorney didn’t respond to a request for comment.

In a statement, Stelliam confirmed it employed Mindlin when the HCA trades took place, while adding that it wasn’t aware of his alleged misconduct at the time. Citadel said it didn’t learn of the SEC investigation until Friday, adding that the regulator’s claims have nothing to do with the firm.

In its order, the SEC said the HCA executive had reviewed internal reports that indicated Obamacare was having a more positive impact on the company’s earnings than previously anticipated. After receiving that information in phone conversations, Mindlin bought 717,500 shares of HCA in June 2014 for his firm, according to the regulator. The SEC didn’t name Mindlin’s employer.

Raising Forecast

Less than a month later, HCA reported its quarterly results and raised its annual profit forecast. Shares jumped more than 10% on the news, and Mindlin’s employer made more than $3.3 million after selling its entire stake in the company.

“Stelliam was not aware of the conduct described in the order at the time the SEC found it to have occurred,” the firm said in an emailed statement. “Subsequent to the time the former employee left the firm for another employment opportunity, the firm was notified of an investigation involving this former employee and cooperated fully with the investigation. Stelliam’s polices prohibited the type of conduct described in the order and those policies were well understood by everyone who worked at the firm.”

“This matter has absolutely nothing to do with Citadel,” the hedge fund firm said in a statement. “The person was not employed at Citadel during the relevant time, the trades at issue had nothing to do with Citadel and until today nobody at Citadel was even aware of this inquiry.”

(Adds comment from Citadel, starting in fifth paragraph)

To contact the reporter on this story: Matt Robinson in New York at mrobinson55@bloomberg.net

To contact the editors responsible for this story: Jesse Westbrook at jwestbrook1@bloomberg.net, Gregory Mott

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