Federal investigators searched the personal electronic devices and online accounts of Rep. Chris Collins' closest associates as they put together an insider trading case against the congressman, prosecutors said in newly filed court papers.
Some of the people whose devices were searched “engaged in suspicious trading" in the Australian biotech stock that's at the center of the criminal case against the congressman, prosecutors said.
Prosecutors did not offer more details about that allegation or identify who made those supposedly suspicious trades in Innate Immunotherapeutics, the Australian biotech that Collins invested heavily in and touted to friends and colleagues.
But they did note that two top Collins staffers – his current chief of staff and his former chief of staff – were among those whose devices were searched.
The language about those suspicious trades came in a scathing rebuttal that ridicules the Collins defense team's argument that the U.S. attorney in Manhattan has no business pursuing its criminal insider trading case against the congressman.
"In the course of investigating Congressman Collins’s personal criminal conduct, the government obtained search warrants for personal devices and online accounts belonging to a number of individuals close to Congressman Collins, some of whom themselves engaged in suspicious trading in Innate during the period charged in the indictment," prosecutors said in a memorandum of law filed in federal court in Manhattan. "Among those individuals were Congressman Collins’s current chief of staff and a former chief of staff, who, during the relevant period, was employed as an outside consultant and paid, at least in part, from Congressman Collins’s campaign funds."
Michael Hook, a longtime Buffalo-area Republican consultant, is Collins' current chief of staff. Chris Grant, who has directed most of Collins' political campaigns, served as the Clarence Republican's chief of staff before leaving to form a political consulting firm.
That does not mean, though, that Hook and Grant were among those who made the suspicious trades. As a congressional staffer, Hook has to publicly report his stock trades, and his reports show that he did not dump Innate stock between June 22 and June 26, 2017. That's the period in which suspicious stock trades occurred that led to felony insider trading charges against Collins, his son Cameron Collins and Stephen Zarsky, Cameron Collins' prospective father-in-law.
The new legal filing shows, though, that Innate was a hot topic in Collins' congressional office in the days in which the alleged insider trades took place.
"Additionally, the government interviewed several of Congressman Collins’s current and former staff members, all of whom were represented by counsel, regarding Innate-related discussions that they had with Congressman Collins during the relevant time period," prosecutors wrote.
Last August, prosecutors charged Collins, his son and Zarsky with fraud, conspiracy and lying to an FBI agent. They said that on June 22, 2017, Collins – at the time a member of Innate's board – got an email from Innate's chairman containing bad news. The company's only product, an experimental drug for multiple sclerosis, had failed in clinical trials.
Attending a White House picnic at the time, Collins immediately started calling his son, prosecutors said. Cameron Collins then told Zarsky, spurring a series of alleged insider trades in which Cameron Collins, Zarsky and six unindicted co-conspirators dumped shares of Innate before the company publicly announced its bad news on June 26, 2017.
Those unindicted co-conspirators include Cameron Collins' fiance, Lauren Zarsky, his prospective mother-in-law, Dorothy Zarsky, and two of Stephen Zarsky's siblings. The other unindicted co-conspirators were a friend of Zarsky's and a friend of Cameron Collins.
It's unclear whether prosecutors were referring to the unindicted co-conspirators when they mentioned suspicious trades by individuals who were close to Collins – or if others close to Collins also dumped Innate stock.
If that were the case, it's possible that the unidentified individuals avoided arrest by cooperating with prosecutors, or that prosecutors simply couldn't accumulate enough evidence to bring charges against them.
A spokesman for Geoffrey S. Berman, the U.S. attorney for the Southern District of New York, refused to comment on the new court filing. Grant refused to comment, and neither Hook nor a spokesman for Collins' legal team responded to requests for comment.
Prosecutors filed the new court document over the weekend in response to several filings by Collins' legal team that questioned whether the Southern District is the proper court venue for the case.
Berman's office made clear in the new filing that the supposed insider trades in the case were indeed rooted in the Southern District of New York, giving him the right to bring charges.
Prosecutors listed several sales of Innate stock trades, and said four of them were "routed to and executed at Manhattan-based brokerages." Other suspicious sales of Innate stock went through internet servers in Rockland County, which is in the Southern District, and another took place through a server on Staten Island "and therefore crossed the waterways in the Southern District of New York," prosecutors wrote.
In addition, the new court filing said that Cameron Collins was in Manhattan – in the Southern District – when he called his friend, the sixth unindicted co-conspirator, with inside information on Innate on June 25, 2017.
Prosecutors also had little patience for the Collins defense team's requests to see reams of additional evidence before the trial in the case, which is set to begin Feb. 3, 2020.
"At bottom, the defendants confuse wanting more information with being entitled to more information," prosecutors wrote. "Indeed, in a Dec. 10, 2018, letter, the defendants initially demanded a bill of particulars spanning more than 60 categories of information. It was the type of blunderbuss request for 'evidentiary minutiae' that the law plainly forbids."
Nevertheless, prosecutors said they know why the Collins defense team wants all that additional evidence.
"To the extent the defendants continue to press for more information, they would simply reveal a desire to tease out—and then pin down—the government’s trial proof nearly a year before trial," prosecutors wrote.
Similarly, Berman and his team responded to Collins' legal argument that they might have violated the Constitution's speech or debate clause in gathering evidence from Collins' staffers.
"At bottom, the Congressman’s claim is that his status as a legislator entitles him to act as a gateway between the Government and potentially incriminating information generated by him or his staff," Berman's new court filing said.
The speech or debate clause says that members of Congress "shall in all Cases, except Treason, Felony and Breach of the Peace be privileged from Arrest during their attendance at the Session of their Respective Houses, and in going to and from the same; and for any Speech or Debate in either House, they shall not be questioned in any other Place.”
That clause generally has been seen as a way to prevent the executive branch from improperly interfering with legislative activities.
Prosecutors said that to prevent that from happening, Berman assigned employees who were not working on the Collins case to review and filter out any material they accumulated that concerned legislation, meaning the remaining evidence pertains only to Collins' alleged criminal activity.
The Collins legal team wants to see evidence prosecutors gathered from the congressman's staffers or former staffers, but prosecutors clearly didn't think much of that request.
"The congressman’s claim that his status as a legislator entitles him to inspect materials that would not be available to an ordinary citizen is a transparent attempt to harness an important guarantee of our constitutional order as a tool for his personal, private benefit," prosecutors wrote. "The law does not countenance such an outcome."