Rep. Chris Collins was at the White House when he committed the act that triggered a federal indictment alleging he, his son and a friend of the family engaged in a conspiracy to commit securities fraud.
It was June 22, 2017, and Collins was at the congressional picnic on the White House grounds. At around 7 p.m. he received an email from the chief executive officer of Innate Immunotherapeutics, an Australian company in which Collins was a director and its largest shareholder.
"I have bad news to report," the email began.
Innate's primary business involved the development of a drug to fight multiple sclerosis called MIS416. But the drug, the CEO said in an email to his board of directors, had failed its latest trial.
"No doubt we will want to consider this extremely bad news," the CEO continued.
When the news became public days later, it would trigger a 92 percent decline in Innate's stock price. But for the moment, the trial's results were known by only a few company insiders.
"Wow," Collins typed back, according to the indictment. "Makes no sense.
"How are these results even possible???"
But, according to federal prosecutors, the congressman within 15 seconds called his son, Cameron Collins. Cameron, with his father's financial help, had also become a major investor in Innate Immunotherapeutics.
Chris Collins called his son twice at 7:11 p.m., but he didn't answer. Cameron, who was living in New Jersey, tried his father back twice minutes later, but the congressman didn't answer. A minute later Cameron called his father, and his father tried his son.
Still they didn't connect, the indictment says.
Finally, at 7:16 p.m., Chris Collins and Cameron talked. Federal prosecutors allege that over the next 6 minutes and 8 seconds, Chris Collins and Cameron discussed MIS416 and its failed drug trial.
By relaying this "material, nonpublic information," Collins violated the company's own policies while "anticipating that Cameron Collins would use it to trade and tip others," the indictment says.
According to prosecutors in the Southern District of New York, that's exactly what Cameron Collins did.
'Call me asap'
When he spoke with his father by phone, Cameron was at the home in Asbury Park, N.J., that he shared with his girlfriend and future fiancee, Lauren Zarsky, 25. She, too, was an Innate stockholder and, because of her recommendation, so were her parents, Stephen and Dorothy Zarsky. "I’ll make sure Cam’s dad keeps us in the loop,” Lauren Zarsky once told them, according to federal investigators.
Armed with the bad news, Lauren logged into her brokerage account. The next morning, she sold 40,464 shares of Inmate she had acquired just days earlier, according to allegations placed against her by the Securities and Exchange Commission.
With the insider tipoff, Lauren Zarsky avoided a loss that could have reached $19,440, the SEC said.
Together, Cameron Collins and his fiancee drove to her parents' home, in nearby Summit, N.J., to give them the news.
NEW: @CBSNews has footage of @RepChrisCollins speaking on his phone at last summer's White House Congressional Picnic. Taken at approximately 7:17 pm; according to the indictment, Collins called his son Cameron at 7:16 pm and they spoke for 6:08 min. pic.twitter.com/5r5rYuq6os
— Sara Cook (@saraecook) August 8, 2018
Cameron Collins had millions of shares to unload, but he agreed to let the Zarskys dump their shares first. Dorothy Zarsky, according to a federal complaint, called her broker immediately and learned how to place an online order to sell her stock on the Australian stock exchange. She successfully sold more than 30,000 of her 50,000 shares around 10 p.m. She sold the rest on a U.S. exchange the next morning, avoiding the approximately $22,000 loss she would have suffered if she had waited until news of the drug trial became public, according to government documents.
Stephen Zarsky sold his shares the next morning, too. At 7:52 a.m., he filed an order to sell his 303,005 shares at 41 cents each, well below the prior day's closing price of 52 cents. But his order went through at 51 cents, letting him avoid a loss of $143,900, prosecutors said.
Cameron Collins, according to the SEC, had to be more careful. Selling his more than 5 million shares at once meant he could send the stock price tumbling if investors saw such a large block up for sale.
"Cameron Collins entered at least 58 orders to sell blocks of Innate shares he owned," the SEC said in a complaint that mirrors the federal grand jury's indictment in many respects. "His trading pattern is consistent with an effort to sell shares quickly while minimizing impact on the share price."
Selling all those blocks of shares, at prices Cameron Collins could not always obtain, took him two trading days. He was on the phone with his father during one attempted transaction, federal investigators said. It was just one of the many telephone exchanges the two had. The telephone calls suggest that not only did the congressman provide his son inside information, he knew, as prosecutors said, the son "would use it."
Stephen Zarsky, meanwhile, was calling relatives and friends who had bought Innate's stock anticipating a better outcome from the drug trial.
"Call me asap," Stephen Zarsky said in a text message to one investor, his sister, shortly after 7:30 a.m. June 23, according to the indictment. When they finally spoke, Zarsky told her she needed to sell the shares immediately and not to ask why. The woman tried to do so, but her broker was unable to execute the order, the indictment says.
Stephen Zarsky then called a friend he knew held Innate stock and told him Cameron Collins's news – that MIS416 had failed the drug trial, the indictment alleges. The friend sold his shares minutes later, avoiding a potential loss of $6,700.
Zarsky told the friend that Cameron Collins had an excuse ready to use in case anyone asked him about his flood of trades: He needed cash to buy a new house. (He did buy a condo near the beach in Asbury Park months later.)
When Chris Collins read his CEO's email at the congressional picnic on the evening of June 22, it was already the morning of June 23 in Australia. Later that morning, trading in Innate was halted on the Australian exchange pending a company announcement that was days away. Innate was letting the investment community know it had the results of the latest drug trial and would announce them on the morning of June 27 in Australia, which would be the evening of June 26 in the United States.
By then, Cameron Collins, Stephen Zarsky and other investors close to them had sold some or all of their shares, prosecutors say. Together, they avoided losses of $768,000, the indictment said.
One investor who did not get out was Rep. Chris Collins, prosecutors said. The previous month, he had tried to get his vast holdings in Innate into a U.S. brokerage account and tried to do the same for the stock held by Cameron and his daughter, Caitlin. But the only U.S. account set up successfully was Cameron's, the SEC said.
Chris Collins' stock had to be sold on the Australian stock exchange, where trading had been halted. Adding to Collins' troubles: He was already under investigation by the Office of Congressional Ethics regarding other concerns about insider trading in Innate. Congressional investigators had interviewed him just days earlier, the indictment said.
After the drug trial's news was announced, Collins tried to conceal the fact that Cameron Collins had already sold some of his stock, prosecutors said. A member of his congressional staff told a Buffalo News reporter that "Cameron Collins has liquidated all his shares after the stock halt was lifted, suffering a substantial loss."
In fact, according to prosecutors, Cameron Collins avoided a loss of about $571,000 by selling some 1.39 million shares on the information his father had provided. But Cameron owned even more shares he had yet to sell.
According to the SEC complaint, just hours after the Collins team told The News that Cameron had liquidated all his shares at a substantial loss, Cameron talked to his father. The son then went about selling his remaining stock, the SEC said.
With news of the failed drug trial circulating widely, Cameron's final 3.8 million shares sold for just pennies each, according to the SEC.