WASHINGTON – Former Rep. Chris Collins, who built his career in politics on his self-proclaimed business acumen, will never again be able to serve on the board of a publicly traded company.
His son, Cameron, will have to cough up $634,299 in ill-gotten gains and interest.
And Stephen Zarsky, whose daughter is engaged to Cameron Collins, will have to forfeit $159,880.
Those are the main terms of settlements the three men reached with the Securities and Exchange Commission that the agency announced Monday. The settlements end a civil case the SEC had brought against the three related to the same insider trading scheme that led them to plead guilty to criminal charges in October.
“Insider trading undermines investor confidence in the fairness and integrity of the securities markets,” said Stephanie Avakian, co-director of the SEC's Enforcement Division. “Today’s settlements, along with the previous criminal pleas, should deter others who may be tempted to engage in this pernicious conduct.”
The SEC settlement could have been far worse for Cameron Collins and Zarsky, who, under federal law, could have been subject to civil fines of up to three times the amount of their ill-gotten gains. The former congressman – who launched a series of insider trades with a phone call to his son – could not be liable for a civil fine because he did not profit from the scheme he set in motion.
Court documents in the case show that all three men agreed to settle the charges with the SEC in mid-October, but the settlements were not filed in federal court in Manhattan until Monday. The settlements are subject to approval by the federal judge in the civil case, Katherine Polk Failla.
For all three men, the settlements are one more echo from the events of June 22, 2017, when Collins, a Republican congressman who represented a district stretching from Buffalo's suburbs to Rochester's, was attending a White House picnic.
Soon after he arrived, he received an email from the CEO of Innate Immunotherapeutics, an Australian biotech firm upon whose board Collins served as a director. The email contained devastating news for the congressman, who was the company's largest shareholder. Clinical trials of the company's only product had failed. That meant that Innate's stock – which Collins had touted to friends, family and congressional colleagues – soon would collapse.
Knowing that, Collins called his son, Cameron.
"I certainly know I made it clear, with the news of Innate's drug trial, that the trial had not succeeded and that, understanding he was a shareholder, that if he could trade the stock, he would," Collins said in court when he pleaded guilty to criminal charges.
The then-congressman could not sell his shares because they were held in Australia, where they were subject to a trading halt. But Cameron Collins was able to avoid $570,900 in losses by selling his shares on the over-the-counter market in New York, where they were held. What's more, Cameron Collins spread Innate's secret bad news to others.
"At the time I did these things, I knew that I and others would avoid losses by selling our shares, and I knew what I was doing was wrong and illegal," Cameron Collins said upon pleading guilty to conspiracy to commit securities fraud on Oct. 3.
The SEC settlement requires Cameron Collins not only to return his ill-gotten gains, but also to pay $63,399 in interest on them.
Among those Cameron Collins told about Innate's bad news was Zarsky, the father of his fiancee, Lauren Zarsky.
"I sold all of my shares of Innate in order to avoid a major financial loss which I could not afford," Zarsky said when he pleaded guilty to conspiracy to commit securities fraud.
Zarsky, who told the court he invested his retirement savings in Innate stock, will now have to give up the $143,900 he saved by dumping his shares. In addition, Zarsky will have to pay $15,980 in interest.
The settlements come more than a month before the three men will appear in federal court for sentencing in the criminal case.
The former congressman is to be sentenced Jan. 17 for conspiracy to commit securities fraud and making false statements to a federal agent. He resigned from Congress on Oct. 1.
Cameron Collins' sentencing in federal court in Manhattan is set for Jan. 23, and Zarsky's sentencing is scheduled a day later.
In settling the civil case, the SEC is doing its part in bringing the three men to justice, said Steven Peikin, co-director of the agency's enforcement division.
“Our complaint alleged in detail how the defendants obtained and misused material nonpublic information for their own financial and personal gain,” Peikin said. “Upon approval, this resolution will strip former Representative Collins of the privilege of serving as an officer or director of a public company and ensure that the traders are deprived of their ill-gotten gains.”