The U.S. Justice Department on Wednesday filed charges against Rep. Chris Collins (R-Clarence), his son Cameron Collins and Stephen Zarsky, the father of Cameron Collins’ fiancée, in an alleged insider trading scheme.
The charges are relating to securities of Innate Immunotherapeutics, an Australian biotechnology company on whose board of directors Chris Collins served. He was also one of the company's largest shareholders, according to federal prosecutors.
According to the charging documents, in June 2017 Chris Collins passed on information about a failed drug trial so his son, Zarsky and others could make trades. By selling stock before the results of the trial were publicly released, the three men and other unnamed individuals avoided $768,000 in losses.
READ THE INDICTMENT HERE
Collins surrendered to authorities early Wednesday. He and his co-defendants all pleaded not guilty at an arraignment Wednesday afternoon. All three were released on $500,000 bond and ordered to surrender their passports and any owned firearms. Chris Collins was also ordered to surrender his diplomatic passport. Parties were given an October 11 return court date.
Timeline: How prosecutors say the trading scandal unfolded
Attorneys for the congressman issued the following statement:
"We will answer the charges filed against Congressman Collins in Court and will mount a vigorous defense to clear his good name. It is notable that even the government does not allege that Congressman Collins traded a single share of Innate Therapeutics stock. We are confident he will be completely vindicated and exonerated. Congressman Collins will have more to say on this issue later today."
Charging documents said Innate was testing a drug called MIS416, to see if it was an effective treatment for Secondary Progressive Multiple Sclerosis.
A successful drug trial was needed before the drug could be sold commercially. And because Innate "had no other significant products in development, its stock prices was tied to the success of MIS416," the court documents state.
The company's stock price fell more than 90 percent after results of the drug trial were released publicly, the documents state.
Chris Collins was first elected to New York's 27th Congressional District in 2012. He is up for re-election this year, and is being challenged by Grand Island Town Supervisor Nathan McMurray, a Democrat.McMurray issued a statement saying the charges underscore the need for new leadership in the 27th Congressional District.
“Today’s allegations by the U.S. attorney were shocking and sad, but not surprising – this has been unfolding, piece by piece, for many months. Anyone who’s been paying attention knows what’s going on. And now the jig is up, because no matter how this is spun, it’s clear that the swamp is alive and well in Washington, DC.”
In a letter to his supporters Wednesday, Collins vowed to fight the charges and said he will stay in the race. The district includes Genesee, Livingston, Orleans, and Wyoming counties and parts of Erie, Monroe, Niagara and Ontario counties.
GOP reaction was muted, but several Democrats are speaking out against Collins. READ MORE HERE.
Hours after the indictment was first reported, House Speaker Paul Ryan (R-WI) removed Collins from the Energy & Commerce Committee, adding in prepared statement "While his guilt or innocence is a question for the courts to settle, the allegations against Rep. Collins demand a prompt and thorough investigation by the House Ethics Committee."
This is not the first time the congressman's involvement with Innate has attracted scrutiny. In October of 2017, the Office of Congressional Ethics issued a report saying that Collins may have broken House rules by allegedly sharing insider information about the company, and referred an investigation to the full ethics committee.
The report said “there is a substantial reason to believe that Representative Collins shared material, non public information in the purchase of Innate stock, in violation of House rules, standards of conduct, and federal law.”
The office investigated allegations that he benefited by having access to discounted stock because of his status as a congressman. But it but found there wasn’t enough evidence to warrant a congressional probe.
Today's indictment however outlines a point-by-point chronology, portraying a scramble by the congressman and others in the wake of bad news about the drug trial. Innate's CEO emailed the congressman and other directors about the results on the evening of June 22 -- when Collins was at a congressional picnic at the White House.
Within minutes, Chris Collins phoned his son and relayed the information "knowing that it was in breach of his duties to Innate and anticipating that Cameron Collins would use it to trade and tip others," the documents state.
According to the documents, the congressman did not make trades himself, because he was under investigation by the Office of Congressional Ethics and his shares were traded on the Australian stock exchange, which had halted trading in Innate stock.
Cameron Collins and others cited in the documents held stock on the U.S. Over The Counter market, where trading in Innate was still allowed.
Before the drug trial results were released publicly on June 26, Cameron Collins made more that 50 trades in Innate stock and sold nearly 1.4 millions shares, the documents state. One online trade was made while he was on the phone with his father.
As a result, Cameron Collins avoided $570,900 in losses.
Cameron Collins relayed the information about the failed drug trial to others, including his fiancee and her family, the documents state. Several of them also sold Innate stock to avoid losses.
