GOP Rep. Chris Collins arrested with insider trading

Insider trading was a family affair for upstate New York congressman Chris Collins, federal prosecutors charged Wednesday.

The Republican lawmaker, one of President Trump’s earliest supporters, was charged along with his son Cameron Collins and the father of Cameron’s fiancée, Stephen Zarsky, in a scheme that allowed them to avoid more than $750,000 in stock losses, prosecutors say.

“Congressman Collins, who by virtue of his office helps to write the laws of this nation, acted as if the law didn’t apply to him,” said Manhattan U.S. Attorney Geoffrey Berman.

The trio are accused of securities fraud related to Innate Immunotherapeutics, an Australian biotechnology company. The elder Collins sits on the firm’s board of directors and is one of its largest shareholders.

Manhattan federal prosecutors say the upstate New York congressman passed to his son confidential information that a new multiple sclerosis drug had failed a medical trial.

Armed with the insider tips, Cameron Collins dumped more than 1 million shares of the stock and passed along the insider information to Zarsky and others, the indictment says.

The public announcement of the failed drug trials caused the Innate stock price to plummet 92%. By dumping their shares early, the Collins clan managed to skirt stock losses totaling $768,000, the indictment says.

“Congressman Collins cheated our markets and our justice system in two ways,” Berman said. “First he tipped his son to confidential corporate information at the expense of regular investors and then he lied about it to law enforcement to cover it up.”

The defendants were all taken into custody Wednesday. They are expected to appear in Manhattan Federal Court in the afternoon to face charges of conspiracy, wire fraud and other counts.

In a separate action, the Securities and Exchange Commission filed a civil action against the 68-year-old Chris Collins, his son and Zarsky. The conspiracy also involved Cameron Collins’ fiancée Lauren Zarsky and her mother Dorothy Zarsky, according to the SEC filing.

Collins’ attorneys released a statement defending the Republican lawmaker.

“We will answer the charges filed against Congressman Collins in court and will mount a vigorous defense to clear his good name,” said lawyers Jonathan Barr and Jonathan New. “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.”

Collins found out about the drug trial failure in an email from Innate’s CEO on the night of June 22, 2017, the indictment says.

The congressman replied to the CEO 15 minutes later. “ Wow. Makes no sense,” he wrote. “How are these results even possible???”

Then Collins and his son traded six missed phone calls over the next four minutes. They finally connected a minute later in a call that resulted in Chris Collins sharing the news of the failed drug trial with his son, the indictment says.

The next morning, Cameron Collins sold 16,508 shares of Innate stock. He sold additional shares in the subsequent hours and days after conversations with his father, the indictment says.

In total, he sold nearly 1.4 million shares of Innate stock between June 23 and June 26. The dumping of his shares allowed him to avoid roughly $570,900 in losses, the indictment says.

Chris Collins did not trade any stocks himself and his holdings ultimately lost millions of dollars in value once the drug trial results were made public. Prosecutors say Collins was blocked from making his own trades because he was under investigation by the Office of Congressional Ethics and his shares were held in Australia where a halt was put on any Innate share buys or sells.

The congressman’s office later released a misleading statement to reporters that suggested his son had not sold any Innate shares prior to the public announcement of the drug trial, the indictment says.

Chris Collins himself made his opinions on the matter clear in an email about press coverage of Innate. “We want this to go away,” he wrote, according to the indictment.

The drug trial results were crushing for the Collins’ crew. Convinced that the results were going to be positive, Cameron Collins had earlier purchased more than five million shares of additional stock in the company. On June 20, 2017, his girlfriend Lauren Zarsky also invested in the company for the first time.

A year earlier, she suggested to her parents to buy Innate stock. “We’ll always keep in touch with cams dad who I’m guessing would know how things are looking as we get closer to the end of the trial,” she wrote in a text message, according to the SEC filing.

She followed up a few days later. “I’ll make sure cams dad keeps us in the loop,” she wrote, according to the SEC filing.

Lauren Zarsky, a public accountant, and her mother Dorothy agreed to settle the charges filed by the SEC, officials said. Neither admitted to insider trading but they agreed to return “ill-gotten gains” of a combined $43,000 and pay a civil penalty totaling the same amount, officials said.

Lauren Zarsky agreed to suspend practicing as an accountant for five years. She can then apply for reinstatement, officials said.

Allegations of suspicious stock trades have dogged Chris Collins for more than 18 months. With Collins leading the charge, Congress passed legislation that could benefit experimental drug makers such as Innate Immunotherapeutics.

“Do you know how many millionaires I’ve made in Buffalo the past few months?” Collins was overheard saying into his cell phone off the House floor in early January 2017.

Chris Collins, whose district covers parts of western New York between Buffalo and Rochester, isn’t the only high-profile Republican who has made a mint selling shares of Innate stock.

Former Health and Human Services Secretary Tom Price more than tripled his investment when he sold his shares in the company in Feb. 2017, raking in at least $225,000, according to public records.