Former Rep. Chris Collins was sentenced Friday, Jan. 17, 2020, to 26 months in prison after pleading guilty to charges involving insider trading. (Jefferson Siegel/Special to The News)
In June 2017, Rep. Chris Collins learned of grim news from the Australian biotech company where Collins was a director and largest shareholder that wasn't public yet.
Monday, Collins resigned his seat in Congress.
The 27 months in between brought a slew of bad publicity, charges of insider trading against Collins and two other defendants including his son, a hard-fought re-election victory in 2018 in th state's reddest congressional district and the prospect of a drawn-out trial in federal district court beginning in 2020.
The case against Collins, who has decided to change his plea after denying wrongdoing in the matter for more than a year, drew international attention. It all started when Collins received an email while attending a congressional picnic.
Here's how the case against Collins and his fellow defendants unfolded, according to the indictment and other public records:
June 2017
The Clarence Republican attended the gathering on the grounds of the White House. About 7 p.m., he received an email from the CEO of Innate Immunotherapeutics. Collins was a director and the largest shareholder of the Australian biotech company. Innate's primary business involved developing a drug to fight multiple sclerosis. But the drug, called MIS416, had failed its latest trial, the CEO said in an email to his board of directors. "No doubt we will want to consider this extremely bad news," the CEO wrote.
"Wow," Collins typed back. "Makes no sense." "How are these results even possible???"
Within 15 seconds of getting the email, Collins called his son, Cameron Collins, who with his father's financial support had become a major Innate investor.
Collins called his son twice at 7:11 p.m., but the pair didn't connect until 7:16 p.m. Federal prosecutors contend that Chris and Cameron Collins discussed MIS416 and its failed drug trial for the next 6 minutes and 8 seconds.
By relaying this "material, nonpublic information," the indictment states, Collins violated the company's own policies while "anticipating that Cameron Collins would use it to trade and tip others."
Cameron Collins was living at the time in Asbury Park, N.J., with his girlfriend and future fiancée, Lauren Zarsky. She, too, was an Innate stockholder and, at her urging, 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.
The indictment says that Cameron Collins first alerted Lauren Zarsky to the failed drug trial and then, together, they drove to her parents' house in nearby Summit, N.J., to give them the news. Cameron Collins had millions of shares to unload, prosecutors say, but he agreed to let the Zarskys dump theirs 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.
The next morning, Dorothy Zarsky sold the rest on an American exchange the next morning, avoiding the approximately $22,000 loss she would have suffered had she 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.
The indictment also says that Lauren Zarsky logged into her brokerage account and, on the morning of June 23, sold 40,464 shares of Inmate she had acquired just days earlier, according to the Securities and Exchange Commission. With the insider tip-off, she avoided a loss that could have reached $19,440, the SEC said.
Cameron Collins had to be careful how to proceed because, prosecutors argue, selling his more than 5 million shares at once meant he could send the stock price tumbling if investors saw such a large block for sale. "Cameron Collins entered at least 58 orders to sell blocks of Innate shares he owned," the SEC said in a complaint. "His trading pattern is consistent with an effort to sell shares quickly while minimizing impact on the share price." Selling took Cameron Collins two trading days. He was on the phone with his father during one attempted transaction, federal investigators said, one of the many telephone exchanges the two had.
Meanwhile, Stephen Zarsky called other 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 who he knew held Innate stock and told him Cameron Collins's news. 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 early 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 nighttime June 26 here.
By then, Cameron Collins, Stephen Zarsky and other investors close to them had sold some or all of their shares, prosecutors say, avoiding losses of $768,000 in total.
Chris Collins, for his part, did not get out. His 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 Innate insider trading. Congressional investigators had interviewed him days earlier, the indictment said.
Late on June 26 in this country, Innate publicly revealed the drug trial's failure, triggering a 92% decline in the company's stock price.
After this announcement, Chris Collins tried to conceal the fact that his son had already sold some of his stock, prosecutors said. A member of his congressional staff told a Buffalo News reporter: "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 hadn't sold. 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.
August 2018
Chris Collins, Cameron Collins and Stephen Zarsky are arrested on insider trading charges. The men all pleaded not guilty and Chris Collins vowed to run for re-election that fall for his congressional seat. At the same time, Lauren and Dorothy Zarsky settled insider trading charges with the SEC. The women agreed to forfeit any gains from their trading, and pay penalties, but they did not admit or deny wrongdoing in the case.
September 2018
Innate changed its name to Amplia Therapeutics. The news release announcing the change did not name the company's infamous experimental MS drug.
November 2018
Chris Collins narrowly defeated Democrat Nate McMurray in New York's most Republican-friendly congressional district.
Aug. 6, 2019
Prosecutors narrowed the indictment against Chris Collins to try to sidestep a potential legal issue raised by his defense team that could have delayed the case well past the scheduled February 2020 start of the trial.
