House

Prosecutors portray GOP member as a brazen lawbreaker

According to federal prosecutors, last summer's jovial congressional picnic at the White House quickly turned south for Rep. Chris Collins.

The New York Republican, a close ally of President Trump and one of his earliest supporters on Capitol Hill, was attending the annual event - a lighthearted gala for members of Congress - when an email arrived from the head of a pharmaceutical company bearing dismal news for the conservative lawmaker who sat on its board: A promising multiple sclerosis drug had failed its clinical trials, and the results would soon go public, threatening to tank the company's value.

"No doubt we will want to consider this extremely bad news," read the message from the CEO of Innate Immunotherapeutics, according to a grand jury indictment handed down Wednesday.

Within 15 minutes, an incredulous Collins had responded: "Wow. Makes no sense. How are these results even possible???"

Collins was Innate's top shareholder at the time, and had pitched House colleagues and investors back home in New York on the company's impending success. Several members of Collins's family had also purchased shares of Innate, leaving some of the congressman's closest relatives on the hook for massive losses.

What Collins did next, prosecutors allege, was a classic case of insider trading and securities fraud.

Collins allegedly contacted his son, Cameron Collins, to convey the news in a six-minute phone call from the White House lawn, the same spot where Collins had posed for a photo with Vice President Pence at the picnic.

Cameron Collins was at home with his fiancée Lauren Zarsky, then his girlfriend, when his father allegedly gave him the confidential tip.

Zarsky, an accountant, had allegedly purchased more than 40,000 shares of Innate two days before the test results came in, ahead of what was expected to be good news for the company. The congressman's son also boosted his position in Innate in the days leading up to the announcement, according to the indictment.

Over the next four days, Cameron Collins would sell almost 1.4 million of his shares, in addition to tipping off a friend, Zarsky and her parents, Stephen and Dorothy Zarsky, who all dumped their stock before the trial results were made public, prosecutors charged.

Stephen Zarsky also shared the insider information with his brother and friend, both of whom owned Innate stock, according to the Securities and Exchange Commission (SEC).

All but Cameron Collins sold the entirety of their Innate stock. The congressman's son owned so many shares that selling them all could trigger a massive drop in the stock price, a major red flag for regulators.

Five days after the initial email to the congressman, when the trial results were released, Innate's stock dropped more than 92 percent. All told, prosecutors say, the investors alerted by Collins and his son avoided more than $768,000 in losses.

"Representative Collins, who, by virtue of his office, helps write the laws of this country, acted as if the law did not apply to him," said U.S. Attorney Geoffrey Berman, who was appointed to the post in January by Attorney General Jeff Sessions. "These charges are a reminder that this is a nation of laws, and everyone stands equal before the bar of justice."

Collins was arrested by the FBI on Wednesday, charged with conspiracy, securities fraud, wire fraud and making false statements to federal law enforcers. A separate civil action was filed by the SEC.

Collins's attorneys quickly declared his innocence, saying their client would be "completely vindicated and exonerated" as the case evolves. Appearing at an arraignment Wednesday afternoon, Collins pleaded not guilty.

"It is notable that even the government does not allege that Congressman Collins traded a single share of Innate Therapeutics stock," Jonathan Barr and Jonathan New, of the Baker & Hostetler law firm, said in a statement.

The statement, however, suggests a curious messaging strategy: Collins is claiming innocence for charges he's not facing. Indeed, prior to the release of the drug-trial results, Innate had halted trading of its stock in Australia, where the company is based and where Collins's shares were held.

"Accordingly, he did not trade his own stock," the indictment reads, "and instead tipped Cameron Collins."

Innate Immunotherapeutics issued a statement late Wednesday distancing itself from Collins and his actions.

The company said it has "cooperated fully with requests for information from the Securities and Exchanges Commission (SEC)," and noted that its directors are not under investigation. The company added that Collins retired as a director in May, and is no longer involved with overseeing the company. 

News of his arrest rippled through Washington, where Collins gained prominence in 2016 by aligning himself squarely with Trump, even when other Republicans were loathe to do so. Collins was the first Capitol Hill lawmaker to endorse Trump during the 2016 campaign - an early bet that paid dividends as Collins, in just his third term, saw his star quickly rise from back-bencher to presidential liaison after Trump won the White House.

Collins became a fixture on cable news shows, and reporters flocked to him in the Speaker's lobby, just off the floor of the House chamber, to get the latest insights from the lawmaker who said he was in regular contact with the president.

His arrest, while not related to Trump's own legal troubles, lends more ammunition to charges from Trump critics that the president, who vowed to drain the swamp in Washington, has become mired in the muck himself.

Already, two Cabinet officials - Tom Price and Scott Pruitt - have been forced to resign over scandals surrounding their misuse of public finances. And several other figures in Trump's close orbit - including Paul Manafort, his former campaign chairman, and Michael Cohen, his one-time personal lawyer - are facing their own federal charges of financial wrongdoing.

Democrats promptly portrayed Collins's arrest as just the latest evidence of inherent misconduct within the Republican Party at large.

"The American people deserve better than the GOP's corruption, cronyism, and incompetence," said House Minority Leader Nancy Pelosi (D-Calif.), who vowed to fight for tougher ethics rules in Washington.

Republican leaders also took steps to distance themselves from Collins. House Speaker Paul Ryan (R-Wis.) called for "a prompt and thorough investigation by the House Ethics Committee" and stripped Collins of his seat on the powerful Energy and Commerce Committee - "until this matter is settled."

The indictment could carry election consequences as well. Once thought a safe Republican district, Collins's seat is now less certain, according to election handicappers. The Cook Political Report wasted no time Wednesday shifting the race from "solid Republican" to "likely Republican."

Democratic campaign operatives were quick to weigh in.

"Few could have imagined that when Chris Collins promised to 'drain the swamp' he was referring to himself," said Meredith Kelly, spokeswoman for the Democrats' campaign arm. "With Collins' arrest for corruption ... this seat is firmly in play for Democrats."

-- Updated 10:10 p.m.

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