Rep. Chris Collins, a Republican from upstate New York, surrendered to the FBI on Wednesday morning on federal charges of using his position on the board of an Australian biotech firm to help his family make illicit stock trades — and avoid more than $768,000 in losses.
Collins, 68, faces insider trading charges along with his son, Cameron Collins, and Stephen Zarsky, the father of Cameron Collins' fiancée, according to the U.S. Attorney's Office in the Southern District of New York. The men are also charged with lying to the FBI in interviews to cover up the alleged scheme.
Collins "placed his family and friends above the public good," Geoffrey Berman, the U.S. attorney for the Southern District of New York, said at a news conference detailing the charges.
The case involves Innate Immunotherapeutics, a North Melbourne-based pharmaceutical company. The elder Collins served on the board for three years until 2017 and is one of the firm's biggest shareholders, owning nearly 17 percent of the stock, which is traded on the Australian Securities Exchange and in the United States on the over-the-counter market.
According to a grand jury's indictment, Collins in June 2017 passed along material that was nonpublic regarding the results of a drug trial — meant to treat an advanced form of multiple sclerosis — so his son "could use that information to make timely trades in Innate stock and tip others."
The drug trial had failed — and Innate's stock would later tumble by 92 percent.
Collins was at a congressional picnic at the White House on June 22 when Innate's CEO sent an email to the company's board of directors that the trial was a bust, according to the indictment.
"I have bad news to report," the email began.
Collins quickly replied: "Wow. Makes no sense. How are these results even possible???"
Then, within six minutes, came a flurry of phone calls to reach his son, who owned more than 2 percent of Innate stock, prosecutors said. He finally reached his son, Cameron Collins, who allegedly passed the information from his father to Zarsky and other unnamed co-conspirators, who then engaged in "timely trades" of the stock.
Cameron Collins unloaded his Innate shares, as did his fiancée and Zarsky, in the days that followed. Zarsky's wife and a friend also benefited from the move, prosecutors said.
On June 26, news of the failed drug trial was made public, and the stock took a nosedive. The defendants ultimately managed to avoid more than $768,000 in losses, prosecutors allege.
The SEC also announced Wednesday it has filed securities fraud charges against Collins in the case.
"Here's a better inside tip for those who think they can play by different rules: Access to this kind of information carries with it a significant responsibility, especially for those who hold a position of trust in our society," William Sweeney Jr., the FBI's assistant director-in-charge, told reporters.
The advocacy group Public Citizen asked the Office of Congressional Ethics and the Securities and Exchange Commission to investigate Collins' stock dealings in January 2017. The group said it was concerned he had purchased millions of shares of Innate in 2016 while also sponsoring legislation that could benefit the firm.
Last fall, members of the House Ethics Committee announced they would review Collins' activities.
House Speaker Paul Ryan, R-Wis., said in a statement Wednesday that the committee must move forward with a "prompt and thorough" investigation.
"Insider trading is a clear violation of the public trust," Ryan said, adding that Collins would be removed from his seat on the House Energy and Commerce Committee for the time-being.
Collins is expected to appear in federal court later Wednesday in Manhattan. He, his son and Zarsky face as many as 20 years in prison if found guilty on a single count of securities fraud.
Attorneys representing Collins said in a statement that they will "mount a vigorous defense to clear his good name."
They added that prosecutors don't allege in the indictment that Collins personally traded Innate stock: "We are confident he will be completely vindicated and exonerated."
Innate executives in Australia could not immediately be reached for comment Wednesday.
Collins, in his third term, was the first congressman to endorse Donald Trump for president.
He represents New York's 27th Congressional District, which includes suburbs of Buffalo and Rochester, and is up for re-election in November. He has raised more than $1.34 million for his campaign, according to the latest Federal Election Commission filing.
Political analysts have considered his Democratic opponent's bid a long shot, The Niagara Gazette reported last month.