NY congressman charged with insider trading; Lamborn had invested in company
Authors: Associated Press, Colorado Politics - August 8, 2018 - Updated: August 8, 2018
NEW YORK — Republican U.S. Rep. Christopher Collins of western New York state was arrested Wednesday on charges he fed inside information he gleaned from sitting on the board of a biotechnology company to his son, helping themselves and others dodge hundreds of thousands of dollars in losses when bad news came out.
U.S. Rep. Doug Lamborn of Colorado had been an investor in the company, Innate Immunotherapeutics Limited, but sold his shares at a loss. He has not been accused of any wrongdoing.
Collins, 68, is a staunch supporter of President Donald Trump who was among the first two sitting members of Congress to endorse his candidacy for the White House.
An indictment unsealed in Manhattan federal court charges Collins, the congressman’s son and the father of the son’s fiancee with conspiracy, securities fraud, wire fraud and making false statements to the FBI.
Prosecutors said the charges stem from Collins’ decision to share with his son insider information about Innate Immunotherapeutics, a biotechnology company headquartered in Sydney, Australia, with offices in Auckland, New Zealand.
Collins was the company’s largest shareholder, with nearly 17 percent of its shares, and sat on its board.
According to the indictment, Collins was attending the Congressional Picnic at the White House on June 22, 2017, when he received an email from the company’s chief executive saying that a trial of a drug the company developed to treat multiple sclerosis was a clinical failure. After a public announcement, the company’s stock price plunged 92 percent.
Collins responded to the email saying: “Wow. Makes no sense. How are these results even possible???” the indictment said. It said he then called his son, Cameron, and, after several missed calls, they spoke for more than six minutes.
The next morning, according to the indictment, Collins began selling his shares, unloading enough over a two-day period to avoid $570,900 in losses before a public announcement of the drug trial results.
Prosecutors said the son traded on the inside information and passed it to a third defendant, Stephen Zarsky. Their combined trades avoided over $768,000 in losses, authorities said. They said Zarsky traded on it and tipped off at least three others.
Collins, a conservative who was first elected in 2012 to represent parts of western New York between Buffalo and Rochester, has denied any wrongdoing. When the House Ethics Committee began investigating the stock trades a year ago, his spokeswoman called it a “partisan witch hunt.”
“We will answer the charges filed against Congressman Collins in court and will mount a vigorous defense to clear his good name,” his attorneys, Jonathan Barr and Jonathan New, said in a statement Wednesday. “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.”
All three defendants were in federal custody Wednesday and were expected to make their initial court appearance in the afternoon. Prosecutors also planned to hold a news conference.
As the Daily Beast first reported in April 2017, Lamborn was among four other Republican congressmen who invested in Innate at market prices.
A financial disclosure form shows the Colorado Springs Republican investing between $15,000 and $50,000 in Innate shares in January 2017.
“Congressman Lamborn purchased the stock on the open market, at fair market value, after all the media discussion about the company,” a spokesman told Colorado Politics at the time. “Additionally, Congressman Lamborn has not made money on this investment.”
Lamborn told Politico earlier this year, before Collins indictment, that he “took a big bath” on his investment, selling his shares for less than $1,000.
He said he did not blame his losses on Collins.
“(Collins) wasn’t pushing it,” Lamborn told Politico. “It was in the media, first of all. If asked about it, he would respond to questions. He wasn’t being pushy. And I figure I’m a big boy and I can make my own decisions. Even if they’re wrong decisions.”
Collins has a track record of publicly backing Trump, most recently calling for an end to Special Counsel Robert Mueller’s probe into campaign collusion and blaming the Obama administration for failing to push back on Russia.
“I share President Trump’s continued frustration as the left continues to try to nullify the 2016 Presidential election with claims of Russian interference,” he said.
On Wednesday, House Speaker Paul Ryan said he was removing Collins from the House Energy and Commerce Committee, calling insider trading “a clear violation of the public trust.”
In a written statement Wednesday, House Minority Leader Nancy Pelosi, D-Calif., said the charges against Collins “show the rampant culture of corruption and self-enrichment among Republicans in Washington today.”
Collins ran unopposed in the Republican primary and holds what’s largely considered a safe Republican seat in a state that went to Democratic nominee Hillary Clinton in 2016. He’s being challenged in November by Democrat Nate McMurray, a Grand Island, N.Y. town supervisor.
The congressman held nearly 17 percent of Innate’s stock. When the drug trials failed, the public announcement caused the company’s stock price to plunge 92 percent.
The advocacy group Public Citizen filed a request for an investigation of Collins’ stock dealings with the Office of Congressional Ethics and the Securities and Exchange Commission in January of 2017.
Tom Price, who was Trump’s first secretary of the Health and Human Services Department, also came under scrutiny for his purchases of Innate stock while he was a Republican member of Congress from Georgia.
Democrats made an issue of Price’s purchase at his Senate confirmation hearings in early 2017, after the Wall Street Journal reported that company officials had said Price was allowed to buy the stocks at a low price. Price, who bought around 400,000 shares of the stock, said he’d learned of the firm through Collins but said the price he received was available to any investor.
Price resigned as health secretary last September under criticism for taking pricey charter flights at taxpayers’ expense.
Colorado Politics contributed.