Upstate Congressman Christopher Collins, his son, and another co-defendant have been indicted in the Southern District of New York on multiple conspiracy charges, including insider trading, as well as securities and wire fraud charges, the U.S. Attorney’s Office for the Southern District of New York announced Wednesday.
The charges relate to Australian biotech company Innate Immunotherapeutics, where Collins served on the board of directors, according to federal prosecutors.
According to the indictment, Rep. Collins, who federal authorities said was the single largest holder of Innate stock, passed along nonpublic information in June 2017 to his son, Cameron, about the results of a trial for a multiple sclerosis drug critical to the company’s business.
Prosecutors said Rep. Collins received information about the drug trial results during a congressional picnic at the White House. The congressman placed a number of calls to his son within minutes, according to prosecutors. U.S. Attorney Geoffrey Berman declined to comment Wednesday on whether Rep. Collins used his personal phone or one at the White House to reach out to his son. Cameron Collins then passed the information along to the other co-defendant, Stephen Zarsky, as well as other unnamed co-conspirators such as his girlfriend, according to the indictment. Zarsky was the father to Cameron Collins’ then-girlfriend.
At a midday press conference, Berman said Rep. Collins violated his duties as a board member of Innate by passing along the results of the trial.
“Congressman Collins had an obligation and a legal duty to keep that information secret until that information was released by the company to the public,” Berman said. “But he didn’t keep it secret. Instead, as alleged, he decided to [commit] a crime, placing his family and friends above the public good.”
Zarsky used the information to tip off another set of unnamed co-conspirators, some of whom he previously encouraged to buy the company’s stock, prosecutors said. All told, the defendants and six co-conspirators were able to avoid $768,000 in losses they otherwise would have faced when stock prices plunged 92 percent after the results of the drug trial went public. Investigators said Wednesday that the trading from those involved in the scheme represented a full half of all of Innate’s trading volume the first trading day after Rep. Collins shared the results of the study.
However, as prosecutors noted, Rep. Collins himself did not trade on the information, losing millions of dollars as the company’s stock price collapsed after the drug trial results went public. They painted Rep. Collins’ loss as less about principle. For starters, the company had halted trading on its stocks ahead of the news about the drug trial results, but only in Australia, where Rep. Collins’ stock was held.
Similarly, prosecutors noted that Rep. Collins was already facing questions over his actions related to the company, initially from congressional investigators. Indeed, the federal charges follow years of review of Rep. Collins’ financial activities. An early supporter of President Donald Trump, Rep. Collins was investigated by the U.S. House of Representatives’ ethics committee in early June 2017, after receiving a referral from the Office of Congressional Ethics related to insider trading concerns. Prosecutors in Manhattan noted that just 17 days before he allegedly passed along insider information, Rep. Collins was interviewed by OCE personnel.
Berman declined to comment on whether congressional investigators provided a referral to the office. He did, however, state that the office had not shared any information previously with congressional ethics investigators.
The three defendants in the criminal matter also face civil charges brought in a parallel action by the U.S. Securities and Exchange Commission. In addition, SEC enforcement division co-director Stephanie Avakian announced at the press conference in Manhattan that Cameron Collins’ then-girlfriend, Lauren Zarsky, and her mother, Dorothy Zarsky, agreed to settlements with the SEC. On top of agreeing to the disgorgement of the ill-gotten gains they allegedly received from selling their stocks, Lauren Zarsky, a CPA, has agreed to a five-year suspension.
According to SEC enforcement division co-director Steven Peikin, SEC market abuse investigators became aware of Cameron Collins’ “suspicious trading,” leading them to other trades that were “well-timed” by people close to him.
Berman declined to state whether the SEC’s investigation led to a criminal referral.
In a statement posted to Rep. Collins’ congressional website, Baker & Hostetler partners Jonathan Barr and Jonathan New said they planned to engage in 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,” the pair said. “We are confident he will be completely vindicated and exonerated.”