Insider trading was a family affair for upstate New York Congressman Chris Collins, federal prosecutors charged Wednesday.
The Republican lawmaker, one of President Trump’s earliest supporters, is accused of sharing inside information about a biotechnology company with his son and the father of his son’s fiancée in a scheme that allowed them to dodge nearly $800,000 in stock losses, prosecutors say.
“Congressman Collins, who by virtue of his office helps to write the laws of this nation, acted as if the law didn’t apply to him,” said Manhattan U.S. Attorney Geoffrey Berman.
The securities-fraud charges against the three men stem from Collins’ relationship with Innate Immunotherapeutics, an Australian biotech firm. Collins sits on the firm’s board of directors and is one of its largest shareholders.
Manhattan federal prosecutors say the upstate New York congressman was at a White House picnic when he tipped off his son Cameron Collins, 25, that a new multiple sclerosis drug had failed a medical trial — a crushing blow for a company whose fate rested with the medication.
Cameron Collins immediately dumped more than a million shares of Innate stock and passed along the news to his fiancée’s father, Stephen Zarsky, 66, and others, the indictment says.
The public announcement of the failed drug trials caused the Innate stock price to plummet 92%. By dumping their shares early, the Collins clan managed to skirt stock losses totaling $768,000, the indictment says.
“Congressman Collins cheated our markets and our justice system in two ways,” Berman said. “First, he tipped his son to confidential corporate information at the expense of regular investors, and then he lied about it to law enforcement to cover it up.”
The three defendants surrendered to authorities Wednesday. They were arraigned in Manhattan Federal Court on a raft of charges including securities fraud, wire fraud and making false statements to the FBI.
The trio, after pleading not guilty, were freed on $500,000 bail. Collins, 68, kept his mouth shut as he left the courthouse surrounded by a scrum of reporters and photographers, and hopped into a black SUV.
Buffalo Mayor Byron Brown called on Collins to resign. But in a statement to his supporters, the upstate legislator vowed not to give up his seat.
"As I fight to clear my name, rest assured that I will continue to work hard for the people of the 27th Congressional District of New York while remaining on the ballot for reelection this November,” it read.
Collins defended the stock sale at an early evening press conference.
“I believe I acted properly and within the law at all times,” he said. “The charges that have been levied at me are meritless.”
House Speaker Paul Ryan, soon after the charges were announced, kicked Collins off the House 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.
Collins vowed to fight the charges and remain in office.
“I will remain on the ballot running for re-election this November,” he said.
In a separate action, the Securities and Exchange Commission filed a civil complaint against Chris Collins, his son and Zarsky. The conspiracy also involved Cameron Collins’ fiancée, Lauren Zarsky, and her mother, Dorothy Zarsky, who both reached a settlement with the SEC, officials said.
Collins found out about the drug-trial failure via an email he received from Innate’s CEO while he was attending the White House congressional picnic on June 22, 2017, the indictment says.
The congressman replied to the CEO 15 minutes later. “ Wow. Makes no sense,” he wrote. “How are these results even possible???”
Then Collins and his son traded six missed phone calls over the next four minutes. They finally connected a minute later in a call that resulted in Chris Collins sharing the news of the failed drug trial with his son, the indictment says.
A photo taken at the picnic shows Collins talking into his cell phone.
The next morning, Cameron Collins sold 16,508 shares of Innate stock. He sold additional shares in the subsequent hours and days after the conversations with his father, the indictment says.
In total, he dumped nearly 1.4 million shares of Innate stock between June 23 and June 26. The massive sale allowed him to avoid roughly $570,900 in losses, the indictment says.
Chris Collins did not trade any stocks himself, and his holdings ultimately lost millions of dollars in value once the drug trial results were made public. Prosecutors say Collins was blocked from making his own trades because he was under investigation by the Office of Congressional Ethics and his shares were held in Australia where a halt was put on any Innate share buys or sells.
The congressman’s office later released a misleading statement to reporters that suggested his son had not sold any Innate shares prior to the public announcement of the drug trial, the indictment says.
Allegations of suspicious stock trades have dogged Chris Collins for more than 18 months. With Collins leading the charge, Congress passed legislation that would expedite the FDA’s approval process for experimental drugs like the one produced by Innate Immunotherapeutics.
It was an open secret in Washington and in upstate New York that Collins convinced several of his businessman friends and fellow Republicans to invest in the stock.
“Do you know how many millionaires I’ve made in Buffalo the past few months?” Collins was overheard saying into his cell phone off the House floor in early January 2017.
Collins isn’t the only high-profile Republican who has made a mint selling shares of Innate stock.
Former Health and Human Services Secretary Tom Price more than tripled his investment when he sold his shares in the company in Feb. 2017, raking in at least $225,000, according to public records.
A spokeswoman said Price, then a GOP congressman from Georgia, learned about the company from Collins. Price resigned as health secretary last September amid waves of criticism for wasting taxpayers’ money on pricey charter flights.
By the summer of 2017, the multiple sclerosis drug was the only viable medication in the pipeline for Innate, raising the stakes of the drug trial, authorities said.
Convinced that the results were going to be positive, Cameron Collins had earlier purchased more than 5 million shares of additional stock in the company. On June 20, 2017, his girlfriend Lauren Zarsky also invested in the company for the first time.
A year earlier, she suggested to her parents to buy Innate stock — and even alluded to Chris Collins’ insider role at the company.
“We’ll always keep in touch with cams dad who I’m guessing would know how things are looking as we get closer to the end of the trial,” she wrote in a text message, according to the SEC filing. She followed up a few days later.
“I’ll make sure cams dad keeps us in the loop,” she wrote, according to the SEC filing.
In their settlement, Dorothy and Lauren Zarsky agreed to return “ill-gotten gains” of a combined $43,000 and pay a civil penalty totaling the same amount, officials said.
Lauren Zarsky also agreed to stop working as an accountant for five years. She can then apply for reinstatement, officials said.