Federal criminal and civil charges of insider trading were filed Wednesday against Rep. Christopher Collins, R-N.Y., his son, and the son's future father-in-law.
The Securities and Exchange Commission filed the civil insider-trading charges against them, while in a parallel action, the U.S. Attorney's Office for the Southern District of New York announced criminal charges. Geoffrey Berman, U.S. attorney for the Southern District of New York, declined at a news conference to comment on whether others will be charged beyond Wednesday's indictment.
It is believed by prosecutors to be the first insider-trading case against a sitting congressman. Mr. Collins served as an independent director of an Australian biotech company, Innate Immunotherapeutics Ltd., working on treating a form of multiple sclerosis. Mr. Collins, one of the company's largest shareholders, served on the board of the company and had access to non-public information, prosecutors said.
He is charged with tipping his son Cameron Collins after receiving confidential information about negative clinical trial results for Innate's multiple sclerosis drug. The son and his girlfriend's father, Stephen Zarsky, are charged with trading and tipping others on the basis of the material, non-public information.
The SEC's complaint alleges that Christopher Collins learned of the negative clinical trial results on the evening of June 22, 2017, in an email from Innate's CEO to the board of directors, which stated that the CEO had "extremely bad news" indicating that drug trial results "pretty clearly indicate 'clinical failure.'" The SEC alleges that Christopher Collins replied to the CEO's email within minutes, expressing his surprise at the results, and then called and spoke to his son.
"We allege that Christopher Collins breached his duty of confidentiality to Innate's shareholders, exploiting his access to non-public information about the company's clinical trial results so that his son could avoid significant financial losses," said Stephanie Avakian, co-director of the SEC enforcement division, in a statement. "Our laws are designed to prevent and punish such misconduct, which undermines investors' trust in the fairness and integrity of our markets." Her co-director, Steven Peikin, said the SEC's investigation "yielded a detailed footprint left by the defendants."
Attorneys for Christopher Collins, Jonathan Barr and Jonathan New of BakerHostetler, issued a statement saying they plan to "mount a vigorous defense to clear his good name. 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."
Attorneys for Cameron Collins also promised to mount a vigorous defense, while an attorney for Mr. Zarsky declined to comment. Officials at Innate Immunotherapeutics couldn't be located for comment.
House Speaker Paul Ryan removed Mr. Collins from the Energy and Commerce Committee on Wednesday and sought an investigation by the House Ethics Committee.
Bloomberg contributed to this story.