Collins to remain on ballot despite insider trading charges
New York GOP Rep. Chris Collins vowed to fight the criminal charges against him in court and win re-election, hours after federal prosecutors arrested him on accusations that he took part in insider trading.
“The charges that have been levied against me are meritless,” Collins said Wednesday. “And I will mount a vigorous defense in court to clear my name. I look forward to being fully vindicated and exonerated.”
Federal prosecutors on Wednesday charged Collins, his son and another man with 13 counts of securities fraud, wire fraud and false statements stemming from an alleged insider trading scheme centered on an Australian pharmaceutical company. He could face up to 150 years in prison if convicted on all counts, according to Nick Biase, a spokesman for the US Attorney’s Office of the Southern District of New York.
Collins, who was the first sitting member of Congress to endorse Donald Trump’s presidential bid, surrendered Wednesday morning at his attorney’s office in Manhattan, according to the FBI.
He told reporters Wednesday evening, during a short news conference where he did not take questions, that he would “not address any issues related to Innate Immunotherapeutics outside of the courtroom” as he sought to clear his name.
“As I fight to clear my name, rest assured, I will continue to work hard for the people and constituents of the 27th Congressional District of New York,” Collins said. “And I will remain on the ballot running for re-election this November.”
Prosecutors at the US Attorney’s Office for the Southern District of New York alleged in an indictment that Collins and the other defendants acted on nonpublic information about the results of a drug trial and used it to trade on the stock of the pharmaceutical company, Innate Immunotherapeutics Limited, of which Collins was a board member.
Innate Immunotherapeutics said in a statement that it had cooperated fully with requests for information from the Securities and Exchange Commission related to the Collins indictment.
“The US media has inaccurately reported that Mr. Collins and colleagues were the beneficiaries of share issuances in the Company on privileged terms,” the statement said. “Mr. Collins (and colleagues) have only ever participated in shareholder-approved share placements or ‘rights issues’ of shares in the Company.”
The indictment doesn’t allege that Collins himself traded on the information about the failed results of a drug trial, but that he passed the information to his son, Cameron Collins, so that the younger Collins could execute trades. And it alleges that the younger Collins passed the information to others, including his fiancee’s father, Stephen Zarsky, who also traded on the information.
That allowed them, prosecutors allege, to avoid more than $768,000 in losses they would have incurred if they had traded the stock after the drug trial results became public. All three then lied about their actions to federal agents, according to the indictment.
“Congressman Collins cheated our market and our justice system in two ways,” US Attorney Geoffrey Berman said at a news conference Wednesday. “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.”
Collins and the other defendants pleaded not guilty in Manhattan federal court Wednesday afternoon. Each must pay a $500,000 personal recognizance bond.
The 30-page indictment highlights that the congressman received the information about the failed drug trial from the company’s CEO and then repeatedly dialed his son while the elder Collins was attending the annual congressional picnic at the White House on June 22, 2017.
At 7:10 p.m. that evening, amid the picnic, Chris Collins responded in an email to the CEO, “Wow. Makes no sense. How are these results even possible???”
One minute later, according to the indictment, Collins began placing phone calls to his son. After failing six times to connect with his son, the congressman reached him on the seventh call and informed him that the drug trial for a multiple sclerosis treatment had failed, the indictment says.
Lawyers for Collins said the congressman would be “completely vindicated.”
“We will answer the charges filed against Congressman Collins in court and will mount a vigorous defense to clear his good name,” Collins’ attorneys, Jonathan Barr and Jonathan New, said in a statement. “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.”
In his remarks Wednesday evening, Collins likewise made a point of noting that he had held onto his shares even when it became clear a drug they once thought would be a “medical breakthrough” had fallen short.
“As a result, the significant investment I made in the company worth millions of dollars (was) wiped out,” Collins said. “That’s OK. That’s the risk I took.”
The indictment said Collins had been “virtually precluded from trading his own shares for practical and technical reasons” — references to both the congressional ethics investigation that was ongoing into Collins regarding the company and that Collins’ shares in the company were held in Australia, “and thus subject to the Australian trading halt.”
“Accordingly, he did not trade his own stock and instead tipped Cameron Collins,” the indictment read.
House Speaker Paul Ryan said Wednesday that Collins would be removed from the House Energy and Commerce Committee “until the matter is settled.”
“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, a Wisconsin Republican, said in a statement. “Insider trading is a clear violation of the public trust.”
It is relatively rare for prosecutors to indict a sitting elected official, particularly in an election year. In Collins’ case, prosecutors from the Southern District of New York carefully weighed when to bring the charges, staying mindful of the upcoming election cycle in November, according to people familiar with the matter.
Justice Department guidelines for federal prosecutors recommend that they avoid taking investigative or prosecutorial steps that could sway voters’ decisions, and the controversy over former FBI Director James Comey’s public announcements during the 2016 presidential election cycle concerning the investigation of Hillary Clinton’s email use have brought even closer scrutiny of such decisions.
Though the charges brought Wednesday don’t pertain to Collins’ conduct in his capacity as an elected official, Berman suggested in his remarks that Collins’ status as a congressman enhanced the hypocrisy of his actions.
“Congressman Collins, who by virtue of his office helps to write the laws of our nation, acted as if the law did not apply to him,” Berman said.
The SEC filed a parallel complaint Wednesday against the three men that seeks to bar the elder Collins from serving as a director of a public company, as well as prevent him from trading penny stocks.
The House Ethics Committee last October disclosed that it was investigating Collins for potentially violating federal law and House rules regarding insider trading. The outside, non-partisan Office of Congressional Ethics began a review of Collins’ activity in March 2017 and that July voted to send its findings to the House ethics panel. The panel can formally launch investigations and recommend any sanctions against any lawmaker it determines has broken any rules. The ethics committee announced in the release of the report that it would start a review of Collins.
The report details how Collins met with officials at the National Institutes of Health to discuss the development of a drug made by Innate.
“There is a substantial reason to believe that Representative Collins shared material nonpublic information in the purchase of Innate stock, in violation of House rules, standards of conduct, and federal law,” the report said.
The House Ethics Committee declined to comment on the indictment Wednesday.
It’s not clear whether the indictment will imperil Collins’s re-election bid. The congressman hails from a reliably Republican district in upstate New York and had been considered a safe bet to retain his seat against a little-known Democrat, Nate McMurray, who on Wednesday immediately seized on the news of the indictment to raise money for his campaign.
Despite the charges, however, Collins indicated in the hours following that he plans to pursue re-election, unnerving Republican leaders worried that the news could put yet another GOP seat in danger of flipping to the Democrats.
New York election laws leave little recourse for Republicans to push Collins out of the race and replace him with another candidate, meaning GOP leaders are likely stuck with Collins on the ballot in the November elections.
This story has been updated and will continue to update with additional developments.