Rep. Chris Collins (R-N.Y.), a top ally of President Trump on Capitol Hill, has been arrested and charged with federal securities fraud related to an Australian pharmaceutical company that counted him among its biggest shareholders.
Collins, who represents parts of western New York, turned himself in to the FBI on Wednesday morning, news reports said. Lawyers for the GOP lawmaker indicated that he would address the charges later Wednesday.
An indictment from a grand jury also charges Collins’s son, Cameron Collins, and Stephen Zarsky, the father of Cameron Collins’s fiancée.
The insider trading case centers on Innate Immunotherapeutics, a Sydney-based pharmaceutical company that tried to develop a drug to fight advanced multiple sclerosis.
Prosecutors allege that Collins, who had served on the company’s board of directors, gave nonpublic information about drug trial results to his son to help him “make timely trades in Innate stock and tip others.”
Geoff Berman, U.S. attorney for the southern district of New York, said Collins “cheated our markets and our justice system” by tipping his son on the insider information.
Collins “acted as if the law didn’t apply to him,” Berman said at a New York press conference. “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.”
Innate had expected positive results from clinical tests of its multiple sclerosis drug, but the treatment was not found to be successful in clinical trials that ended in June 2017.
According to the indictment, the company received the test results on June 22 and halted trading of its stock in Australian markets pending the announcement of the negative findings, but not in the U.S.
The company’s CEO shared the results with board members and top executives that evening, according to the indictment, explaining, “I have bad news to report.” Investigators said Collins received the email while attending the White House Congressional Picnic and was stunned by the news.
“Wow. Makes no sense. How are these results even possible???” Collins allegedly replied to the email.
Collins then allegedly shared the confidential test results with his son, who later sold more than 1.3 million shares of Innate in U.S. markets ahead of the June 26 announcement of the drug’s failure.
Collins did not sell his Innate shares and lost roughly $17 million after the results were announced, but his son allegedly avoided more than $570,000 in losses because of the alleged tip from the congressman.
Cameron Collins allegedly shared the test results with Zarsky, who has also been charged with securities fraud. Zarsky allegedly sold more than 300,000 shares of Innate after being tipped on the negative test results, avoiding roughly $143,00 in losses.
Collins and Zarsky are alleged to have shared the results with six other unnamed individuals, some of whom bought and sold Innate stock on their suggestion.
“In the hours and days after learning of the drug trial results, [Collins], his son and their associates exchanged a flurry of calls,” said Steven Peikin, co-director of the Securities and Exchange Commission’s (SEC) 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.”
Chris Collins, Cameron Collins and Zarksy are also alleged to have lied to federal agents in April about their trading and recommendations of Innate stock and their advance knowledge of the the test results.
In a brief statement, attorneys for Collins declared that the three-term lawmaker is innocent.
“We will answer the charges filed against Congressman Collins in Court and will mount a vigorous defense to clear his good name. It is notable that even the government does not allege that Congressman Collins traded a single share of Innate Therapeutics stock,” said Jonathan Barr and Jonathan New of Baker Hostetler law firm.
“We are confident he will be completely vindicated and exonerated.”
While Collins is not alleged to have sold his own Innate shares, it appears that he was technically unable to do so.
Innate froze the trading of its shares in Australia, but not the U.S., between when the results were received on June 22 and announced on June 26. Publicly traded companies often freeze their stock ahead of major announcements to prevent insider trades and manipulation.
The congressman’s shares of Innate were held in Australia, preventing him from selling the stock before the announcement sank its value.
Collins in May 2017 had attempted to move his Innate shares, along with those owned by Cameron and his daughter, from an Australian transfer agent into a U.S. brokerage account, according to the indictment. But the congressman was unable to transfer his and his daughter’s stock to the U.S.
Collins was condemned quickly by retiring House Speaker Paul Ryan (R-Wis.), who removed the congressman from the House Energy and Commerce Committee after his arrest.
“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.”
Collins has been under investigation by congressional officials for his connections to Innate since 2017. An October 2017 report from the Office of Congressional Ethics (OCE) found that there was “substantial reason” to believe Collins had violated federal law by sharing inside information with Innate investors.
Collins’s legal team said then that the report was “spurred by unfounded accusations that trace their origin to political opponents,” naming the late Rep. Louise Slaughter (D-N.Y.).
Slaughter, who died in March, had asked the SEC, the acting U.S. attorney for the Southern District of New York, the House Ethics Committee and the OCE to investigate Collins over his stock pitches to colleagues. Slaughter was a co-author of the STOCK Act, which bans members of Congress from insider trading.
And multiple Republican lawmakers told The Hill last year that Collins had boasted about making money for other members of Congress by urging them to invest in the company.
Former Health and Human Services Secretary Tom Price was among those who bought Innate stock when he was a Georgia congressman. So did House Agriculture Committee Chairman Mike Conaway (R-Texas), Rep. Markwayne Mullin (R-Okla.) and Rep. Billy Long (R-Mo.).
Also last year, Collins was overheard by reporters in the Speaker’s lobby bragging to someone on his cellphone that he’s made “many millionaires” in Buffalo.
Avery Anapol, Emily Birnbaum and Megan Keller contributed