WASHINGTON — The term "insider trading" conjures up images of men in fancy suits being dragged out of their Wall Street offices in handcuffs, not members of Congress.
Yet that's the term at the heart of the congressional investigation into Rep. Chris Collins' stock trading, even though there's no indication yet that the Clarence Republican is being investigated for criminal wrongdoing.
Independent congressional ethics experts and Collins' own legal team agree that the most serious accusation against him is that, as the largest shareholder of an obscure Australian biotech firm, he knew of good things to come for the company's stock price — and then acted on that inside knowledge.
But there is no sign, at least so far, that the Securities and Exchange Commission is probing Collins. And without the SEC's involvement, Collins won't be subject to potential criminal charges.
Instead, he may or may not face far lesser penalties handed out by his peers, legal experts said Tuesday, a day after the House Ethics Committee revealed it is probing Collins' actions.
Here's a close look at the charges lodged against Collins in complaints filed with the Office of Congressional Ethics:
Insider trading: This is the most serious allegation against Collins, and the one his legal team is gearing up to fight.
Collins is the largest investor in Innate Immunotherapeutics, an Australian company whose sole product is an experimental treatment for multiple sclerosis. Last summer, he purchased 4 million more shares of Innate stock at a discount in a private stock sale.
The question investigators are probing is: Did Collins — who sits on Innate's board of directors — buy those shares based on inside knowledge?
If he did, he could be in violation of laws making it illegal for company insiders to trade based on privileged information, or the STOCK Act, which bars lawmakers from trading based on pending congressional action.
The SEC investigates possible violations of insider trading laws, working with Justice Department lawyers on criminal charges.
An SEC spokesperson, Judith Burns, declined to comment on Collins. But Collins' legal team has not heard from the agency.
The SEC has technology to track trades and prove insider trading. But Robert L. Walker, a former chief counsel and staff director of the Senate and House ethics committees and a former SEC attorney, said separation-of-powers provisions in the Constitution bar the Ethics Committee and SEC from conducting a joint investigation, although they could launch parallel probes.
Collins' lawyers have turned over detailed information to the House Ethics Committee, which could recommend that the House fine, reprimand, censure or expel him.
Investigators could have trouble turning that evidence into a case against Collins, several sources said.
It's often difficult to connect the dots between an investor's knowledge and actions, said S. Todd Brown, a law professor at the University at Buffalo who dealt with insider trading issues in the private sector.
Besides, nearly a year after Collins bought those additional Innate shares, the company announced that the clinical trials of its drug had failed, causing the stock to tank and Collins to lose at least $5 million. So his lawyers can argue that he didn't clearly profit from inside information.
Legislating to benefit Innate: Last fall Congress passed the 21st Century Cures Act, a law that includes a provision written by Collins that makes it easier for companies such as Innate to conduct clinical trials.
Investigators might be probing whether Collins wrote that provision to benefit Innate.
"That would be a very serious violation of House ethics rules," said Craig Holman, government affairs lobbyist at Public Citizen's Congress Watch. "That would mean he's using his official position to enrich himself."
Collins' lawyers are expected to argue, though, that Collins' amendment benefits not just Innate, but every drug company -- including its competitors.
Using his office for personal gain: The complaints against Collins also allege he broke a House rule that bars lawmakers from profiting from their position in office. And even his lawyers acknowledge that he talked up the stock to anyone who would listen, including his colleagues.
"It's egregious and insulting that he would do this in the halls of Congress where the STOCK Act was written to keep people from using insider information for their own financial gain," said Rep. Louise M. Slaughter, the Fairport Democrat who authored the STOCK Act.
Collins' spokesperson, Sarah Minkel, refused to answer a series of questions about his involvement with Innate. Instead she released a statement that said: "Congressman Collins has followed all applicable ethics laws and regulations concerning his personal finances. While The Buffalo News continues to play into the partisan witch hunt conducted by Congresswoman Louise Slaughter and her left-wing allies, Congressman Collins is in his district this week meeting constituents, going to events and doing the job he was elected to do.”
Richard W. Painter, a law professor at the University of Minnesota and former chief ethics lawyer under President George W. Bush, said it was wrong for Collins to dismiss the serious allegations as partisan attacks.
"Ethics is not a left or right issue," Painter said.