A New York Republican Congress member who bragged about turning his friends and acquaintances into millionaires — and was one of President Trump’s earliest and biggest supporters — was just arrested and charged with insider trading.
Rep. Chris Collins, along with his son Cameron Collins and the father of his son’s fiancée, Stephen Zarsky, was arrested by FBI agents early Wednesday morning, according to NBC News. The case is centered on the Australia-based pharmaceutical company Innate Immunotherapeutics, a company in which Collins is currently the No. 2 shareholder. At one point, he held more than $45 million in Innate stock.
According to the federal government’s indictment, Collins shared non-public information about Innate — specifically, about negative results resulting from Innate’s clinical trials — with his son, who then passed that information along to Zarsky. The federal government alleges that by doing so, Collins, his son, and Zarsky were able to avoid nearly $800,000 in potential losses.
Collins’s connections with Innate Immunotherapeutics are well-known, with the Daily Beast reporting in 2017 that Collins had had close ties with the company since 2005. He encouraged many of his Republican colleagues to buy Innate stock, including former Health and Human Services Secretary Tom Price (in fact, claims of insider trading were leveled against Price during his confirmation hearing). According to Business Insider in June 2017:
Price bought shares of the company in 2015 and 2016 while still a member of the House, representing Georgia. At least four of Collins’ Republican House colleagues followed suit, buying into Innate in January when the company traded at an all-time high of about $1.20 per share. Collins’ chief of staff, Michael Hook, is among Innate’s top 20 shareholders, as are two of the congressman’s children. “I talk about it at every turn, just like you talk about your kids hitting a home run and your daughter getting into law school,” Collins told The Hill ...
He even bragged publicly, and in front of reporters, about how many of his friends, colleagues, and donors he had made wealthy by recommending they invest in Innate.
OH in the speaker's lobby: 'Do you know how many millionaires I've made in Buffalo the past few months?' -@RepChrisCollins on his cellphone — Mike DeBonis (@mikedebonis) January 10, 2017
Collins was the first member of Congress to endorse Donald Trump, doing so on February 24, 2016, and he served as the congressional liaison to the Trump transition team.
In response to the federal government’s indictment, Collins’s lawyers released a statement Wednesday morning saying, “We are confident he will be completely vindicated and exonerated.”
Read the indictment below:
Image copyright Reuters Image caption Chris Collins was arrested by the FBI on Wednesday morning in New York City for alleged insider trading
A US congressman has been accused of using inside information to make illicit stock trades.
Christopher Collins, 68, allegedly told his son to sell shares in a pharmaceutical company before news of a failed trial caused stocks to drop.
The New York Republican's son avoided $570,000 (£442,000) in losses thanks to the tip-off, says the indictment.
The representative, who denies the charges, is not accused of selling stocks himself.
Cameron Collins, the son, and his fiancée's father, Stephen Zarsky, are also charged with insider trading of Innate Immunotherapeutics Limited stocks.
The defendants allegedly tried to avoid losses by getting information regarding the results of a drug trial before the news went public.
The congressman did not trade any of his own shares, which eventually lost millions of dollars in value.
However, prosecutors say this was because he "was already under investigation by the Office of Congressional Ethics in connection with his holdings in, and promotion of, Innate".
Christopher Collins had reportedly been interviewed by the watchdog 17 days earlier.
In addition, Mr Collins' shares were held in Australia, unlike his son's shares, which could be traded in the US market.
Geoffrey Berman, US Attorney, said during a news conference on Wednesday: "In total, the conspirators avoided loses of over $768,000, all because of the initial illegal insider trading tip by Congressman Collins."
Attorneys for Mr Collins said in a statement that they will "mount a vigorous defence 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. We are confident he will be completely vindicated and exonerated."
The 30-page indictment states that Cameron Collins sold around 1,391,500 shares of Innate stock before the company announced the drug trial had failed and prices plummeted.
He also tipped off multiple people including his fiancée's family and a friend about the inside information.
Innate had been working on a drug to treat Secondary Progressive Multiple Sclerosis which would have been "enormously profitable" if successful, according to the indictment.
When news that it had failed broke on 26 June 2017, the Innate stock price plummeted 92% in a single day.
"This was the drop in value that the co-conspirators avoided by selling their shares before the public announcement," Mr Berman said.
"They could only sell their shares by virtue of the initial tip of inside information by Congressman Collins."
The company had expected the trial to be successful throughout that year.
Four days before the news went public, the indictment states, Mr Collins received an email from the company's chief executive detailing "bad news" about the trial.
Mr Collins, who was at the congressional picnic at the White House when he received the mail, allegedly responded: "Wow. Makes no sense. How are these results even possible???"
He then allegedly called Cameron Collins seven times, after which his son began selling large amounts of Innate stock until 26 June.
According to the indictment, the son even sold 50,000 shares while still on the phone with his father.
Alleged co-conspirator Mr Zarsky is said to have avoided over $143,000 in losses by selling his stocks early. He too then proceeded to tip others.
Mr Collins surrendered to the FBI and was arrested on Wednesday morning, US media report. He faces charges from the FBI and Securities and Exchange Commission of securities and wire fraud and lying to federal officials.
House Speaker Paul Ryan said the House Ethics Committee would be investigating the congressman. He will also be removed from his post on 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," Mr Ryan said, according to the Washington Post.
"Insider trading is a clear violation of the public trust."
The pro-Trump politician, who is up for re-election in November, has been a member of Congress since 2013, representing suburban and rural areas around the New York State city of Buffalo.
In a statement to CNBC, attorneys for Collins vowed to "mount a vigorous defense to clear his good name."
They added: "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."
Later on Wednesday, Collins issued a statement sharing the "very bad news" with his supporters while vowing to continue his re-election fight for the 2018 midterms in November, according to a New York Times reporter.
Cameron Collins' attorney, Rebecca Ricigliano, said, "We look forward to addressing these charges in court, and will not be commenting on this case outside of the courtroom."
An attorney for Zarsky told CNBC they had no comment at this time.
Collins was Trump's first supporter in Congress, and was reportedly a member of his transition team after the 2016 presidential election. The 27th congressional district in New York, which Collins currently represents, voted for Trump at a higher level than any other district in the state in 2016.
The indictment related to Innate draws new attention to an ex-Trump administration official: former U.S. Health and Human Services Secretary Tom Price, who was grilled by lawmakers during his confirmation hearings in January 2017 about a tip on the company he allegedly received from Collins.
Price resigned last September following an embarrassing series of news stories detailing his use of pricey commercial and charter jet travel during his brief tenure as HHS chief.
HHS' Office of Inspector General last month said the department should try to recoup at least $341,000 that Price had wasted on the flights. Just one out of the 21 such flights he took met all federal requirements, the watchdog said in a report.
A spokesman for Price told CNBC, "Dr. Price addressed his ownership of Innate Immunotherapeutics stock during his confirmation hearings for HHS Secretary and sold any stock he held in February 2017." The spokesman declined to respond to CNBC's questions about whether Price has been contacted by the DOJ in relation to this case, or if he has hired attorneys.
Separately, a source close to Price told CNBC that the former HHS secretary was not questioned by investigators from the Southern District of New York.
Republican Rep. Chris Collins' arrest and indictment on insider trading charges Wednesday suddenly makes his safe red congressional district a lot more interesting in November's midterm elections.
The New York 27th District, lodged between Buffalo and Rochester in the western part of the state, has grown more Republican since Collins first won it narrowly in 2012. The area backed President Donald Trump by nearly 25 percentage points in 2016, while Collins breezed to re-election with about 67 percent of the vote.
The stain of the insider trading accusations quickly makes the district more competitive — although it still favors Republicans. Regardless, the GOP cannot afford another contested seat in the state as it fights to stop Democrats from winning the 23 Republican-held seats the party needs to take a House majority.
Nonpartisan election analysis sites Cook Political Report and Sabato's Crystal Ball moved their ratings for the district to "likely" Republican from "solid" "safe" Republican, respectively, on Wednesday. A scandal can cause a 10- to 12-percentage-point swing and Collins' arrest is "perhaps on the more severe side," tweeted Nate Silver, data guru and editor in chief of analytics site FiveThirtyEight.
Collins pleaded not guilty to the charges on Wednesday. In an email to supporters earlier in the day, the representative said his "focus is to defeat these charges in court" and that he will "not address any issues related" to the accusations outside of the courtroom, according to New York Times reporter Shane Goldmacher. Collins stressed that he does not plan to abandon his re-election bid as of now.
"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," he wrote.
Collins appears likely to stay on the ballot: relevant periods to give up a party nomination have passed, according to the New York State Board of Elections. The deadline for a special election under New York law has also passed.
Liberals seized on the news of Collins' arrest almost immediately. The New York Working Families Party started to raise money for the Democratic candidate in the race, Grand Island Town Supervisor Nate McMurray. The party said, "We can defeat this corrupt Trump Republican and win this seat in November." Collins was Trump's first supporter in Congress during the 2016 campaign.
The Democratic Congressional Campaign Committee also contended that "this seat is firmly in play for Democrats."
On the other side of the aisle, the GOP indicated that it was taking the matter seriously. House Speaker Paul Ryan, R-Wis., called for a "prompt and thorough" investigation into the allegations and removed Collins from the House Energy and Commerce Committee.
"Insider trading is a clear violation of the public trust," Ryan said in a statement.
