Republican congressman charged with insider trading
Republican US Repres-entative 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.
An indictment unsealed in Manhattan federal court charges Collins, 68, the congressman's son, and the father of the son's fiancÈe 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 Limited, a biotechnology company headquartered in Sydney, Australia, with offices in Auckland, New Zealand. Collins was the company's largest shareholder, with nearly 17 per cent 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 per cent.
Collins responded to the email saying: "Wow. Makes no sense. How are these results even possible???" the indictment said.
The information was confidential, but Collins "didn't keep it secret", United States Attorney Geoffrey Berman said at a news conference. "Instead, he decided to commit a crime."
Within minutes of receiving the bad news, Collins used a phone to try to "reach his son six times in five minutes," Berman said. "And then on the seventh attempt, he got through to his son, and, as alleged in the indictment, he illegally relayed the results of that drug test so his son could trade on that information."
The next morning, according to the indictment, Collins began selling his shares, unloading enough over a two-day period to avoid US$570,900 in losses before the 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 US$768,000 in losses, authorities said. They said Zarsky traded on it and tipped off at least three others.
All three defendants were in federal custody Wednesday and were expected to make their initial court appearance in the afternoon.