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Collins indicted on securities fraud charges, says he'll run for re-election

Rep. Chris Collins once told supporters to disregard news reports about apparent conflicts of interest involving one of his stock investments.

But on Wednesday morning, he was the one breaking what he called "very bad news" to supporters via email: He was about to be charged with a crime.

A few hours later, Collins, his son, Cameron, and his son's future father-in-law surrendered to federal authorities in Manhattan, where prosecutors indicted all three on a host of federal charges tied to alleged insider stock trading.

The stunning announcement opened a sprawling criminal case that endangers Collins' chances of winning a fourth term and immediately diminishes the public role of one of President Trump's loudest and proudest supporters.

During an evening news conference in downtown Buffalo, a defiant Collins said he "acted properly and within the law at all times" and would remain on the ballot in November.

The indictment stems from Collins' habit of touting the stock of Innate Immunotherapeutics, an Australian biotech company where he long served as a director and the company's largest investor. He pleaded not guilty during an arraignment in federal court in Manhattan Wednesday afternoon.

Court papers filed by prosecutors and Securities and Exchange Commission officials show that Collins continued touting that company's stock through June of 2017.

But then, on a night when Collins was at a White House picnic, he got an email from the company's top executive saying that Innate's only product – a multiple sclerosis treatment – had failed in clinical trials. Prosecutors say that email prompted Collins to call his son, Cameron, who subsequently sold more than a million shares of Innate stock while telling his would-be father-in-law and three others to sell their Innate stock as well.

The indictment says the father of Cameron Collins' fiance, Stephen Zarsky, then sent the sell signal to his brother and a friend.

[PDF: Read the indictment]

In other words, Chris Collins stands accused of setting off a chain of illegal stock trades in a phone call from the White House lawn.

“Collins, who, by virtue of his office, helps write the laws of this country, acted as if the law did not apply to him,” Geoffrey S. Berman, U.S. attorney for the Southern District of New York, said at a news conference in Manhattan where he spelled out the indictment.

During his news conference, Collins outlined his long history with Innate and his hope that its research could lead to treatments from diseases including multiple sclerosis. He referred to the charges against him as "meritless" and said, "I will mount a vigorous defense in court to clear my name."

He did not take any questions from reporters.

The alleged scheme

Collins, his son and Zarsky each face 11 federal charges: seven counts of securities fraud, one count of wire fraud, two conspiracy charges and a charge of making false statements to the FBI. Each of the charges carry prospective prison terms.

The conspiracy that Collins finds himself accused of has nothing to do with an earlier Office of Congressional Ethics report that it had "substantial reason to believe" that the congressman may have been illegally sharing stock tips regarding Innate in 2016.

While the House Ethics Committee has been looking into those charges, prosecutors and the SEC turned their attention to later events, which began with an email from Innate CEO Simon Wilkinson to Collins on the evening of June 22, 2017.

Wilkinson reported "extremely bad news": Innate's experimental treatment for multiple sclerosis had failed completely in clinical trials.

Collins, at the White House picnic, replied: "Wow. Makes no sense. How are these results even possible???"

Prosecutors said Collins then immediately tried calling his son, Cameron, now 25. The two exchanged six missed calls over five minutes before Collins connected with his son at 7:16 p.m.

The two then talked for 6 minutes and 8 seconds. And then, at about 7:42 a.m. the next morning, Cameron Collins started dumping his Innate shares. Prosecutors said he sold nearly 1.4 million shares over the next four days.

But that wasn't all he did. Prosecutors said that on the night of June 22, after talking to his father, Cameron Collins told his fiancee and his prospective in-laws about Innate's bad news. Zarsky then told his brother and a friend the inside news that Innate's only product had failed in clinical trials.

That prompted a rash of selling from the people with inside information – which occurred before Innate announced the bad news in a press release on the night of June 26, 2017.

Innate's stock price collapsed by 92 percent as soon as word of its failed product became public. But because they sold out early, the people who sold early based on inside information saved a grand total of more than $768,000 that they would have lost if they had held onto their Innate stock, prosecutors said. Cameron Collins saved the most: about $570,000.

Collins accused of lies

Despite all the charges against him, Collins does not stand accused of personally profiting from the scheme. In fact, the congressman likely lost at least $5 million when Innate's stock became nearly worthless.

Still, he stands accused of launching the insider trading scheme – and lying about it.

In April of this year, an FBI agent questioned the congressman about the stock trades his son and others had made just before Innate announced that its only product had failed in clinical trials.

"During this interview, Christopher Collins stated, in substance and in part, that he did not tell Cameron Collins, the defendant, the drug trial results before the public announcement," the indictment said. "This statement ... was false, as Christopher Collins, the defendant, well knew."

Collins' statements in that FBI interview led to the indictment's charge that Collins made a false statement to a federal officer.

 

But it's not the only untruth that the indictment mentions. Prosecutors said that after he shared Innate's damning inside information with his son, and after Cameron Collins dumped some of his shares, Collins' office misled "a local reporter" who asked whether any members of Collins' family had sold any of their Innate shares.

"Neither Christopher Collins, (nor) his daughter ... have sold shares prior, during or after Innate's recent stock halt," the statement said, referring to a halt in stock trading when the bad news was announced.

"Cameron Collins has liquidated all his shares after the stock halt was lifted, suffering a substantial financial loss," said the statement, which Collins aides delivered in response to questions from The Buffalo News.

Prosecutors didn't think much of that statement.

"This statement was written in a manner designed to mislead the public into believing that Cameron Collins had not sold any Innate shares prior to the public announcement," they said in the indictment. "As Christopher Collins explained in an email about press coverage surrounding Innate, 'We want this to go away.' "

Widespread ramifications

The Collins indictment has enormous ramifications, both locally and nationally.

With Collins insisting he will run despite the federal charges, two Washington election prognosticators – the Cook Political Report and Inside Elections with Nathan L. Gonzales – immediately upgraded the chances that Collins' Democratic challenger, Grand Island Town Supervisor Nathan McMurray, could pull an upset in New York's largely Republican 27th Congressional District. Both previously rated the district as solidly Republican, but with Wednesday's move they changed their ratings to "likely Republican."

[The Chris Collins inside trading case: Here's who else was involved]

But Gonzales, in a piece on the Roll Call website, noted that lawmakers in deep legal trouble in Staten Island and in Louisiana won re-election in recent years.

"Just because a member of Congress is indicted, doesn’t mean they can’t win," Gonzales wrote.

By staying in the race, though, Collins is likely to become something of a punching bag for Democrats.

“Public service is a sacred trust,” said Buffalo Mayor Byron W. Brown, speaking in his role as state Democratic Party chairman. “If anyone violates that trust, or the oath of office that they have sworn to uphold, they should not continue to serve in elected office. Congressman Collins should resign.”

The Democratic National Committee issued a statement saying Collins' arrest "highlights the culture of corruption polluting the Republican Party." And even Rep. Brian Higgins, a Buffalo Democrat with a friendly relationship with Collins, piled on.

“The allegations included in the indictment against Rep. Chris Collins can be summed up in one word: shameful," Higgins said.

With a court hearing set in the Collins case less than a month before the November election, the indictment is likely to put a shroud on Collins' high profile in Washington. House Speaker Paul Ryan, a Republican from Wisconsin, released a statement in which he said he had removed Collins from his seat on one of the most powerful committees in the House.

“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. "Insider trading is a clear violation of the public trust. Until this matter is settled, Rep. Collins will no longer be serving on the House Energy and Commerce Committee.”

Collins is also likely to diminish his role as a highly televised spokesman for President Trump.

The first House member to endorse Trump for president in February 2016, Collins has appeared on television dozens of time to defend the president. Recently, for example, Collins has appeared frequently on Chris Cuomo's CNN show to spout the Trump company line.

But all that support for the president didn't pay off in any help for Collins on Wednesday. The president, who frequently takes to Twitter to discuss his own legal problems, tweeted nothing about Collins. And an email to two White House spokespeople seeking comment went unanswered.

But Berman, the U.S. attorney whom Trump appointed to serve in the Southern District of New York, had plenty to say.

“These charges are a reminder that this is a nation of laws and that everybody stands equal before the bar of justice," Berman said at his press conference in Manhattan.

News reporters Tom Precious, Maki Becker, Aaron Besecker and Robert McCarthy contributed to this story.

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