Rep. Christopher Collins of New York was arrested on federal charges relating to securities fraud Wednesday, in a case involving an Australian biotech company.
A Securities and Exchange Commission complaint against Collins — the first congressional Republican to endorse President Donald Trump’s bid for the White House — also details charges against his son Cameron and the father of his son’s girlfriend, Stephen Zarsky. All three have pleaded not guilty to the charges against them.
The SEC complaint says that in June 2017, Rep. Collins passed on nonpublic information about Innate Immunotherapeutics’
unexpectedly negative drug-trial results to his son. Collins was a board member of the company. The case says that Cameron Collins sold nearly 1.4 million shares based on nonpublic information.
Zarsky also allegedly traded on the insider information. By selling shares before the drug-trial results were announced to the public, Cameron Collins, Stephen Zarsky and those they tipped off avoided losses of about $768,600, the SEC said.
Rep. Collins “cheated our markets and our justice system,” said Geoffrey Berman, U.S. attorney for the Southern District of New York, at a news conference. “He placed his family and friends above the public good.”
From the MarketWatch archives: Innate Immunotherapeutics stock plummets 92% after midstage clinical trial miss
Rep. Collins, according to the complaint, got an email from Innate’s chief executive officer about the results while attending an official event on the South Lawn of the White House on June 22, 2017. (Read the SEC’s complaint.)
“Wow. Makes no sense. How are these results even possible???” the congressman responded, before calling his son from the same event.
What’s more, the complaint indicates Collins took steps in the weeks leading up to the trial results to ensure his son’s Innate shares would be “readily tradeable.” At the time, Collins and his son and daughter each owned shares held by an Australian agent that couldn’t be sold in the U.S.
Rep. Collins, his son and Zarsky are also charged with making false statements to the Federal Bureau of Investigation.
“Congressman Collins couldn’t keep his crime a secret forever,” Berman said. “The FBI asked to interview him, and, instead of telling the truth, he lied.”
Lawyers for Collins said in a statement that the government “does not allege that Congressman Collins trade a single share of Innate Therapeutics stock.”
That’s true, but the government says the congressman benefited in other ways. The SEC’s complaint says Rep. Collins got a “personal benefit” from tipping off his son, and that the congressman “also knew or recklessly disregarded that Cameron Collins would trade on his tip.”
In a 2016 Supreme Court case, the high court ruled unanimously that “giving a gift of trading information is the same thing as trading by the tipper followed by a gift of the proceeds.”
“We are confident he will be completely vindicated and exonerated,” said Collins lawyers Jonathan Barr and Jonathan New.
Berman told reporters that politics did not “enter into our decision making” regarding the case, which comes ahead of highly anticipated November midterm elections. “We bring a case when a case is ready to be brought.”
The Buffalo News reported that Collins, whose congressional district encompasses portions of the Buffalo and Rochester areas, vowed in an email to supporters that he’ll stay in office, run for re-election and fight to clear his name.