GOP Rep. Chris Collins charged with securities fraud
Rep. Chris Collins (R-N.Y.), the first member of Congress to back President Donald Trump before the 2016 election, was indicted Wednesday by federal prosecutors and charged with fraud in connection to an alleged insider-trading scheme linked to his investments in an Australian biotech firm.
The third-term congressman, who represents a district in western New York, had been under scrutiny from the Office of Congressional Ethics for his connection to the company, Innate Immunotherapeutics. He was the company’s largest shareholder and served on its board.
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Prosecutors say that in 2017, Collins passed inside information to his son, Cameron, who passed it to another alleged conspirator, Stephen Zarsky, father of Cameron Collins’ fiancee. The three — all of whom pleaded not guilty to charges of securities fraud, wire fraud and making false statements to the FBI — and other family and friends avoided about $768,000 in losses as a result of the inside information, prosecutors allege.
“Congressman Collins, who by virtue of his office helps to write the laws of our nation, acted as if the law didn’t apply to him,” said Geoffrey Berman, the U.S. attorney for the Southern District of New York, announcing the charges.
Collins’ attorneys rejected the allegations.
“We will answer the charges filed against Congressman Collins in court and will mount a vigorous defense to clear his good name,” said Collins’ lawyers, Jonathan Barr and Jonathan New of BakerHostetler. “It is notable that even the government does not allege that Congressman Collins traded a single share of Innate Therapeutics stock. We are confident he will be completely vindicated and exonerated. Congressman Collins will have more to say on this issue later today.”
Nicholas Biase, a spokesman for the U.S. attorney’s office, said Collins would be arraigned Wednesday afternoon in New York.
Meanwhile, the Securities and Exchange Commission announced its own insider-trading charges against Collins, his son and Zarsky.
“In the hours and days after learning of the drug trial results, Christopher Collins, his son, and their associates exchanged a flurry of calls,” said Steven Peikin, co-director of the SEC’s enforcement division. “The investigation yielded a detailed footprint left by the defendants, revealing their frantic efforts to sell shares and warn others before Innate announced bad news.”
The SEC also said it settled additional charges against Lauren Zarsky — the girlfriend of Collins’ son, the SEC said, though the indictment says they later became engaged — and her mother, Dorothy Zarsky, for insider trading. The pair did not admit or deny wrongdoing but agreed to give up “ill-gotten gains” and pay fines, the SEC said.
House Speaker Paul Ryan said Wednesday that Collins would not serve on the House Energy and Commerce Committee “until this matter is settled,” saying that “insider trading is a clear violation of the public trust.”
According to the indictment, the alleged conspiracy began on June 22, 2017, while Collins was attending the White House’s congressional picnic. He received an email from Innate’s CEO alerting him that the company’s highly touted drug had failed in clinical trials. He replied, “Wow. Makes no sense. How are these results even possible???”
Prosecutors say Collins then alerted his son, Cameron, on the results of the trials, but didn’t trade shares himself. The congressman was already under investigation at the time for his relationship with Innate by the Office of Congressional Ethics. Though Collins couldn’t trade his own stock, prosecutors say he tipped off his son to help him avoid losses. His son, in turn, told other associates, who sold stock in Innate as well. The drug test results were made public on June 26, 2017.
Prosecutors allege that an aide to Collins’ congressional office issued a statement to a local reporter “in a manner designed to mislead the public” about when Collins’ son had sold his shares.
Collins told POLITICO in December that there was “nothing” to the allegations he had traded insider information, which had surfaced publicly amid the congressional ethics inquiry.
“I hate that I lost every penny that I invested, but as a general rule, if I’m trading on insider information, no one could do worse than me — who lost every penny, and I still own every share,” said Collins, who saw the value of his stake plunge as much as $17 million as of June 2017.
Previous scrutiny of Collins’ relationship with Innate Immunotherapeutics also highlighted his efforts to persuade colleagues and associates to invest in the company. Among his former colleagues who had invested: former Health and Human Services Secretary Tom Price, who made $225,000 on his investment, according to public records. Collins told congressional ethics investigators that he likely discussed the company with Price on the House floor, who was in the House until he joined Trump’s Cabinet in April 2017.
“[W]hen we’re sitting on the House floor, killing time during a motion to recommit, we talk about our kids, and we talk about our vacations and we talk about … the New York Yankees, in my case, my companies,” Collins said.
Nick Peters, a spokesman for Price, said he “addressed his ownership of Innate Immunotherapeutics stock during his confirmation hearings for HHS secretary and sold any stock he held in February 2017.”