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Chris Collins turned down a plea deal in insider trading case

WASHINGTON – Federal prosecutors offered Rep. Chris Collins a plea deal before indicting him on felony insider trading charges earlier this month, but the Republican from Clarence rejected it, two sources who asked not to be identified told The Buffalo News.

Terms of the proposed plea deal were not disclosed, and lawyers for Collins and the U.S. attorney for the Southern District of New York – which brought the charges against him – declined to comment.

Criminal lawyers who are not involved in the case said, though, that they were not surprised that prosecutors sought to get Collins to settle the charges against him. They said they wouldn't be surprised, either, if Collins and the other defendants in the case eventually plead guilty before the case goes to trial.

"It would be unusual for a plea offer not to be made while in the pre-indictment phase," said Michael S. Taheri, an Amherst defense lawyer who also noted that more than 95 percent of such federal cases end in plea deals.

The U.S. attorney in Manhattan issued an 11-count indictment against Collins on Aug. 8, accusing him of fraud, conspiracy and lying to a federal officer.

The indictment involves the Collins family's investments in Innate Immunotherapeutics, an Australian biotech firm.

Prosecutors say Collins, while at a White House picnic last June 22, got an email telling him that Innate's only product – an experimental treatment for secondary progressive multiple sclerosis – had failed in clinical trials. They allege phone records show that Collins then called his son, who started unloading his Innate stock the next day while also spreading the inside information about the failed drug trial.

Cameron Collins and his prospective father-in-law, Stephen Zarsky, also face criminal charges in the case – and they, too, may end up settling with the government before the case goes to trial, said four independent legal experts asked about the case by The Buffalo News.

"In any stage of the proceedings, it's not uncommon for either the government or the defendants to engage in plea negotiations," said David Chase, a Florida attorney who used to prosecute insider trading cases as a senior counsel for the Securities Exchange Commission’s enforcement division.

Chase and Paul Cambria, a Buffalo defense attorney, both said Chris Collins might eventually plead guilty in order to ensure that his son can do the same – and to ensure that both of them end up with lesser sentences than they would probably get if they were to be tried and convicted.

"In a case like this, prosecutors usually play the family card," Cambria said. "The father would plead guilty in order to get concessions for the son. I would be shocked if that weren't part of the deal."

Cambria, however, said Rep. Collins could pose a strong defense in court by essentially ignoring that family dynamic. After all, Chris Collins – Innate's largest shareholder – didn't sell any of his Innate stock, and therefore ended up losing at least $5 million when the stock crashed after the release of the clinical trial results.

"Chris Collins can say: 'Hey, I told my son about those test results, but I didn't tell him to sell the stock'," Cambria said.

John Coffee Jr., a renowned corporate law professor at Columbia University, said Collins could argue that he told his son the clinical trial results in confidence.

"But if you say that, you're turning on your son and sending him to prison," Coffee noted.

In contrast, by pleading guilty, Chris Collins would likely not only help ensure that his son got a lesser sentence, but also probably save the younger Collins a lot of money.

The congressman and the other defendants also face civil insider trading charges filed by the Securities and Exchange Commission, and if there's a plea deal, a settlement in that civil case would likely be part of it. In such cases, Chase said the typical civil payment is to pay back illicit gains, plus a fine in the exact same amount.

If the case goes to trial and the defendants lose, the SEC can seek civil damages of up to three times the amount of the illicit gains, Chase said.

Given that prosecutors say Cameron Collins saved himself about $570,000 by selling his Innate stock, he would have to pay that money back as part of any settlement and probably pay a $570,000 fine as well. But if Collins and his son fight the criminal case at trial and lose, the SEC wouldn't have to go to trial on the civil charges, Chase said.

Instead, the SEC could seek summary judgment in its favor and ask for a fine that's triple what defendants typically pay when they plead guilty to such charges, Chase added. That could bring Cameron Collins' fine to more than $1.7 million.

Asked about the possibility of a plea deal, Trevor Francis, a spokesman for Rep. Collins' lawyers, said: "The legal team won’t comment on this beyond restating what they and Mr. Collins have said previously. Congressman Collins intends to fight these charges in court and ultimately be vindicated."

Similarly, one of Cameron Collins' lawyers, Rebecca Monck Ricigliano, said: "We intend to mount a vigorous defense on behalf of our client, Cameron Collins. We look forward to addressing these charges in court, and will not be commenting on this case outside of the courtroom."

A lawyer for Zarsky, Amanda Bassen, offered no comment on the case or the prospect of a plea deal.

Taheri, the Amherst defense lawyer, said that if a plea deal is reached, it will also likely involve all three defendants in the case.

Any such deal probably won't be as generous as the one prosecutors dangled before the defendants before indicting them, he added.

Even so, Chris Collins, his son and Zarsky might want to agree to some sort of plea agreement eventually, Coffee, the Columbia law professor, said. That's because criminal defendants typically feel more pressure to settle as their trial approaches.

"It's still early," Coffee said. "People who are between a rock and a hard place tend to feel it more the closer they get to the courtroom door."

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