Collins indicted on insider trading charges
One by one, he lifted the sheets off several charts that federal prosecutors say methodically detail Rep. Chris Collins’ involvement in a scheme to commit securities fraud that dates back as far as 2013, when Collins began using his congressional position to tout a stock in which he had significant financial interest.
“With these charges we are reminded that this is a nation of laws and everyone stands equal before the bar of justice,” said Berman. “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. The charges today demonstrate once again, that no matter what the crime and no matter who committed it, we stand committed in the pursuit of justice without fear or favor.”
Collins, his son, Cameron, and Stephen Zarsky — the father of Cameron Collins’ fiancee — surrendered to federal authorities in New York City Wednesday morning as they were arrested on charges of insider trading.
Collins pleaded not guilty Wednesday afternoon at his arraignment in Manhattan as Judge Vernon Broderick set bail at $500,000. Broderick also informed Collins that he must surrender his diplomatic license and any firearms he might own. The judge set Oct. 11 for a status hearing in the case.
A 30-page indictment, unsealed Wednesday by the U.S. Attorney’s Office for the Southern District of New York, details the alleged lengths to which Collins went to avoid financial loss when an Australian biotech company that he invested in, called Innate Immunotherapeutics, failed a key clinical drug test, putting the company in financial jeopardy.
According to the indictment, Innate’s primary business was the research and development of a drug called “MIS416,” which was intended to treat secondary progressive multiple sclerosis. It notes that in June 2017, Innate completed a drug trial which was meant to determine the drug’s clinical efficacy in treating SPMS. Because few treatments exist on the market, the drug had the potential to be enormously profitable if the trial was successful.
It wasn’t. The public announcement of the failed trial caused the stock price of Innate to drop by 92 percent.
Collins first invested in Innate about 15 years ago. He had raised enough money for the company that he eventually earned a spot on its board of directors, a position he resigned from in April. The indictment states that his status within the company allowed him access to material, nonpublic information, including details about the drug trial.
In June 2017, the indictment says, upon Collins’ knowledge that the drug trial had failed, he immediately contacted his son, Cameron. Cameron Collins is then alleged to have tipped off Stephen Zarsky, also a defendant named in the indictment, to the same information, who allegedly further pushed the undisclosed information to other Innate investors.
Innate issued a press release that same month, stating that the drug had failed its trial, noting that it did not show “clinically meaningful or statistically significant differences in measures of neuromuscular function or patient reported outcomes.”
As a result, Innate’s stock price crashed, but not before prosecutors say Cameron Collins offloaded nearly 1.4 million shares of Innate onto the public stock trading market between June 23 and 26, prior to Innate publicly releasing the results of the failed drug trial.
These trades allowed Chris Collins, Cameron Collins, Zarsky and others to avoid more than $768,000 in losses, the indictment says.
“Access to this kind of information carries with it significant responsibility, especially for those in society who hold a position of trust,” said Bill Sweeney, assistant director of the FBI’s New York division, at Wednesday’s press conference. “Act honorably and in accordance with the law, and do not lie to special agents of the FBI.”
The federal indictment released Wednesday is not the first time that Collins’ name has appeared in headlines about his relationship with Innate Immunotherapeutics.
In May 2017, House ethics investigators began an official probe of Collins for his role in recruiting investors, often other lawmakers, to buy Innate stock. The Stop Trading on Congressional Knowledge Act, passed by Congress in 2012, explicitly bars members of Congress from trading stocks using insider information.
One month later, two Republican lawmakers told The Hill, a political newspaper and website based in Washington, D.C., that Collins had boasted about how much money he’s made for other members of Congress by tipping them off. The report alleges that Collins, during a dinner earlier in 2017, told a group of House GOP colleagues that he had urged other lawmakers to invest in Innate.
In October, an Office of Congressional Ethics report found there was “a substantial reason to believe” that Collins violated federal law by buoying Innate stock. It goes on to state that Collins sent several emails to Innate investors that included private information about the company, and that in November 2013, Collins met with officials at the National Institutes of Health and asked that an NIH researcher meet with Innate’s chief science officer to discuss possible clinical trials for MIS416 — a violation of House rules.
As a result of the charges brought against Collins by the U.S. Attorney’s Office, House Speaker Paul Ryan announced Wednesday that he has temporarily removed Collins from the Energy and Commerce Committee.
“While his guilt or innocence is a question for the courts to settle, the allegations against Rep. Collins demand a prompt and thorough investigation by the House Ethics Committee,” Ryan said in a statement. “Insider trading is a clear violation of the public trust. Until this matter is settled, Rep. Collins will not be serving on the House Energy and Commerce Committee.”
Steve Peikin, co-director of the Securities and Exchange Commission’s Division of Enforcement, told reporters on Wednesday that the indictment levied against Collins serves as a cautionary tale to investors as well as evidence of the SEC’s willingness to clamp down on actions that might erode public trust in the stock exchange.
“An action like this is illegal. It is also corrosive. It threatens investor confidence in the fairness and integrity of our markets,” he said. “For our capital markets to retain their place as the envy of the world, the SEC and its law enforcement colleagues must be vigilant in policing against this misconduct. Those who would engage in this sort of behavior should know that we will continue to devote our resources, our expertise and our energy to finding them and seeking to hold them accountable.”