WASHINGTON – Some 9,929 miles from a New York courtroom where prosecutors charged Rep. Chris Collins with insider trading, there's another set of laws that might seem to put the Clarence Republican in more legal jeopardy.
But when asked about the U.S. government's case against Collins, spokespeople for both the Australian securities regulator and the Australian Stock Exchange said Friday they had not taken any action against Collins regarding his investments in Australian biotech firm Innate Immunotherapeutics – and they gave no indication they plan to do so.
That lack of official action in Australia didn't impress James Wheeldon, a dissident Innate shareholder who has long questioned Collins' involvement in the firm.
"I find it very strange that you have U.S. authorities alleging conduct that amounts to very serious criminal offenses in Australia – certainly go-to-jail offenses – and the authorities here are doing nothing," said Wheeldon, a securities lawyer who used to work for Australia's version of the Securities and Exchange Commission. "This is embarrassing."
Australian securities law says that if a person has inside information about a public company's prospects, "the insider must not, directly or indirectly, communicate the information, or cause the information to be communicated, to another person if the insider knows, or ought reasonably to know, that the other person would or would be likely to ... apply for, acquire, or dispose of ... financial products."
Federal prosecutors in the United States have accused Collins of doing just that – calling his son, Cameron, from a White House picnic last June to tell him the bad news about the Australian company they were both heavily invested in: that its only product, an experimental treatment for multiple sclerosis, had failed in clinical trials. That led to insider trading charges against the congressman, his son, and Stephen Zarsky, the father of Cameron Collins' fiancee.
All three have pleaded not guilty. Collins has called the charges "meritless" and has vowed to mount a "vigorous defense."
Regulators in Australia, though they have cooperated with U.S. investigators, aren't doing much else regarding Innate.
Australia's Takeovers Panel, a government body that reviews securities transactions, has taken a look at allegations "about the scale of Mr. Collins’ shareholding, the nature of any relationship with other shareholders and related issues," said Gervace Greene, national media manager for the Australian Securities and Investments Commission. That's the Australian agency that oversees that nation's securities laws and the Takeovers Panel.
"We have not made any comment about those allegations, other than to note that at least some of them were considered by the Takeovers Panel, which reportedly saw no need for further action," Greene added.
Outraged over this, Wheeldon said he would file a formal complaint about the lack of official action on Monday.
He said it was silly for the Australian securities regulator to say the Takeovers Panel was responsible for reviewing concerns regarding Innate.
"The panel is not a law enforcement agency – ASIC is," he said.
But the Australian securities regulator has said nothing about insider trading at Innate, noted Sean O'Neill, a blogger at the Australian version of the Motley Fool investment website.
"Australian investors may of course wonder why this ASX insider trading is being prosecuted by the SEC instead of our own suited gentlemen at ASIC," O'Neill wrote. "They will have to keep wondering, as ASIC is not particularly quick off the mark."
Asked if the Australian Stock Exchange, known as ASX, might take any action involving Collins or Innate, a spokesman for the stock exchange essentially said no.
"ASX doesn’t determine if companies or individuals have broken the law," said the stock exchange spokesman, Matthew Gibbs. "We have no powers to do so. That’s a matter for regulators."
Gibbs absolved the Australian Stock Exchange of any responsibility regarding the unusual timing of the events at the center of the Collins stock scandal.
"The timing was a matter for the company," Gibbs said.
Here's how that timeline played out:
• On June 21, 2017, Innate issued a news release saying the U.S. Food and Drug Administration had cleared its application for studying its "investigational new drug" for multiple sclerosis in the U.S. Innate touted this clearance as "particularly important," but sources with knowledge of the new drug approval process later told The Buffalo News that the clearance was entirely routine.
• A day later, Innate CEO Simon Wilkinson called Collins, who was at a White House picnic at the time, to tell him that Innate's experimental multiple sclerosis drug had failed in clinical trials in the U.S., according to the indictment against Collins. Prosecutors allege that the congressman then called his son, Cameron, who started unloading his shares in Innate the next morning.
• Hours after that – on Friday, June 23, Australian time – Innate asked the Australian Stock Exchange to put a halt on trading in its stock, pending a news announcement from the company. That trading halt did not stop over-the-counter trading in Innate stock in America.
• The following Monday night – June 26 in America, but Tuesday, June 27 in Australia – Innate announced that its drug trails had failed.
Wheeldon has criticized the company for waiting four days to announce the company's bad news.
But Gibbs, the stock exchange spokesman, said there was nothing unusual about the length of the trading halt.
"The halt lasted two business days – Friday and Monday – as is standard," he said. "The criticism that it took the company four days overlooks the weekend in between when the market is closed and announcements can’t be made."
But Wheeldon said it was silly for Gibbs to dismiss those two weekend days as part of the trading halt when trading in the stock could have, and did, continue in America.
Given how little Australian authorities have done about a scandal that led to arrests in the U.S., O'Neill warned investors in his country to be wary of small biotech companies such as Innate.
"Let this be a lesson to investors out there considering investing in risky parts of the market in unproven or speculative miners, biotechs, and technology stocks," he wrote. "Suspicious trading is not the unusual part of this story – what’s unusual is that they got caught."