GOP Rep. Chris Collins charged with securities fraud Collins had been under scrutiny for his connection to the biotech company, Innate Immunotherapeutics.

Rep. Chris Collins (R-N.Y.), the first member of Congress to back President Donald Trump before the 2016 election, was indicted Wednesday by federal prosecutors and charged with fraud in connection to an alleged insider-trading scheme linked to his investments in an Australian biotech firm.

The third-term congressman, who represents a district in western New York, had been under scrutiny from the Office of Congressional Ethics for his connection to the company, Innate Immunotherapeutics. He was the company's largest shareholder and served on its board.


Prosecutors say that in 2017, Collins passed inside information to his son, Cameron, who passed it to another alleged conspirator, Stephen Zarsky, father of Cameron Collins' fiancee. The three — who were arraigned Wednesday afternoon in New York and pleaded not guilty to charges of securities fraud, wire fraud and making false statements to the FBI — and other family and friends avoided about $768,000 in losses as a result of the inside information, prosecutors allege.

"Congressman Collins, who by virtue of his office helps to write the laws of our nation, acted as if the law didn't apply to him," said Geoffrey Berman, the U.S. attorney for the Southern District of New York, announcing the charges.

Collins' attorneys rejected the allegations.

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

In a late-evening news conference, Collins insisted on Wednesday that he would remain on the ballot for his re-election bid in November.

"The charges that have been levied against me are meritless," he said. "I look forward to being fully vindicated and exonerated."

He defended his role with the biotech firm and said he remained "proud" of his association with it.

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Meanwhile, the Securities and Exchange Commission announced its own insider-trading charges against Collins, his son and Zarsky.

“In the hours and days after learning of the drug trial results, Christopher Collins, his son, and their associates exchanged a flurry of calls,” said Steven Peikin, co-director of the SEC’s enforcement division. “The investigation yielded a detailed footprint left by the defendants, revealing their frantic efforts to sell shares and warn others before Innate announced bad news."

The SEC also said it settled additional charges against Lauren Zarsky — the girlfriend of Collins' son, the SEC said, though the indictment says they later became engaged — and her mother, Dorothy Zarsky, for insider trading. The pair did not admit or deny wrongdoing but agreed to give up "ill-gotten gains" and pay fines, the SEC said.

House Speaker Paul Ryan said Wednesday that Collins would not serve on the House Energy and Commerce Committee "until this matter is settled," saying that "insider trading is a clear violation of the public trust."

According to the indictment, the alleged conspiracy began on June 22, 2017, while Collins was attending the White House's congressional picnic. He received an email from Innate's CEO alerting him that the company's highly touted drug had failed in clinical trials. He replied, "Wow. Makes no sense. How are these results even possible???"

Prosecutors say Collins then alerted his son, Cameron, on the results of the trials, but didn't trade shares himself. The congressman was already under investigation at the time for his relationship with Innate by the Office of Congressional Ethics. Though Collins couldn't trade his own stock, prosecutors say he tipped off his son to help him avoid losses. His son, in turn, told other associates, who sold stock in Innate as well. The drug test results were made public on June 26, 2017.

Prosecutors allege that an aide to Collins' congressional office issued a statement to a local reporter "in a manner designed to mislead the public" about when Collins' son had sold his shares.

Collins told POLITICO in December that there was "nothing" to the allegations he had traded insider information, which had surfaced publicly amid the congressional ethics inquiry.

"I hate that I lost every penny that I invested, but as a general rule, if I’m trading on insider information, no one could do worse than me — who lost every penny, and I still own every share," said Collins, who saw the value of his stake plunge as much as $17 million as of June 2017.

Previous scrutiny of Collins' relationship with Innate Immunotherapeutics also highlighted his efforts to persuade colleagues and associates to invest in the company. Among his former colleagues who had invested: former Health and Human Services Secretary Tom Price, who made $225,000 on his investment, according to public records. Collins told congressional ethics investigators that he likely discussed the company with Price on the House floor, who was in the House until he joined Trump's Cabinet in April 2017.

"[W]hen we’re sitting on the House floor, killing time during a motion to recommit, we talk about our kids, and we talk about our vacations and we talk about … the New York Yankees, in my case, my companies," Collins said.

Nick Peters, a spokesman for Price, said he "addressed his ownership of Innate Immunotherapeutics stock during his confirmation hearings for HHS secretary and sold any stock he held in February 2017.”

Another GOP lawmaker, Colorado Rep. Doug Lamborn, purchased Innate stock for $15,000 to $50,000 and recently sold it for less than $1,000. Lamborn said he "took a big bath" on the stock but was not angry at Collins. He said there was media focus on the company, and he was "intrigued by the possibility there was something for multiple sclerosis," the company's main clinical focus.

"[Collins] wasn't pushing it," Lamborn told POLITICO in an interview earlier this summer before Collins' indictment. "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."

Other lawmakers who Collins recruited to buy stock in the company: Reps. Markwayne Mullin (R-Okla.), Billy Long (R-Mo.) and Mike Conaway (R-Texas). Collins also told OCE that some members of his staff were among the investors.

Berman, the U.S. attorney, would not say whether other members of Congress were under investigation, saying only that it was "not an aspect of this indictment."

Conaway's office said he invested in Innate Immunotherapeutics because of its efforts to develop a treatment for multiple sclerosis, "which impacts a close friend of his." He sold his shares, according to a spokeswoman, in November 2017 at a "considerable loss."

Collins often heatedly rejected any charges of insider trading, and he took particular umbrage at the drive by one Democratic New York colleague, Rep. Louise Slaughter, to delve deeper into his business dealings. Slaughter, who died in March, had prodded the SEC and the U.S. attorney for the Southern District of New York, along with congressional investigators, to pursue allegations of insider trading by Collins.

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“Anyone who has the privilege to be a member of Congress has a responsibility to uphold the public trust and meet the highest ethical standard," she said in a statement in October. "He put his obsession to enrich himself before the people he swore to represent. It is a disgrace to Congress and to his constituents, who deserve better.”

Collins rebuked Slaughter at the time, calling her a "despicable human being" as a result of her push.

The indictment comes just three months before the November midterm elections, but Berman said the timing wasn’t political.

“Politics does not enter into our decision making on charging a case,” Berman said. “We bring a case when the case is ready to be brought.”

Still, Democrats in New York jumped at the news Wednesday. The 27th District is the most Republican in the Empire State and had been considered a reach even as the blue state prepares for a blue wave.

But Gov. Andrew Cuomo had been targeting Collins for months, angry that he pushed a Medicaid funding tweak — shifting billions in local costs to the state’s budget — in House legislation that would have repealed the Affordable Care Act. Cuomo had even pushed his lieutenant, former Rep. Kathy Hochul, to leave the ticket and run against Collins.

Cuomo and Hochul are facing a Democratic primary challenge from Cynthia Nixon and New York City Councilman Jumaane Williams. According to his allies, Cuomo sought to drop Hochul from the ticket to increase its racial diversity, but she demurred, recognizing the up-hill nature of a run against Collins, who defeated her in 2012.

Democrats culled a larger field and settled on Grand Island supervisor Nate McMurray to challenge Collins. Erie County Executive Mark Poloncarz, a Democrat who defeated Collins in the lawmaker's bid for a third term in that office in 2011, said the indictment changed the calculation.

“Unfortunately, because of the demographics of the district, Nate was having trouble getting his message out as well as fundraising,” Poloncarz told POLITICO. “I think that all changed as of 10 o’clock this morning. Now, I think it’s on the radar all across the country.”

Jake Sherman and John Bresnahan contributed reporting.