Former NY Rep. Chris Collins Pleads Guilty to Insider Trading Charges

By:
Chris Gaetano
Published Date:
Oct 2, 2019
Untitled design - 2019-10-02T124501.579

Christopher Collins, who until recently was a member of Congress representing western New York's 27th district, has pleaded guilty to conspiracy to commit securities fraud and lying to the FBI as part of an insider trading investigation that engulfed himself, his son and his son's fiancée's father, according to the Wall Street Journal

Collins was indicted last summer over accusations that he gave inside information to his son over a failed medical trial conducted by Innate Immunotheraputics Ltd., for which Collins served as a board member.

The drug trial concerned the firm's primary product, MIS416, which is intended to treat Secondary Progressive Multiple Sclerosis (SPMS). While the company had anticipated positive results from the trial, which had been ongoing since 2014, by the summer of 2017 it was found that MIS416 did not show clinically meaningful or statistically significant differences in the measure of neuromuscular function or patient reported outcomes. Essentially, the trial had failed. 

On the night of June 22, Innate requested a halt in trading on exchanges in Australia, where the company is based, but, critically, not in the U.S. over-the-counter market. The halt was scheduled to last five days. On the day before the halt ended, the company put out a press release publicly stating that the drug on which the company had pinned all its hopes had failed. The company's stock plummeted, losing 92 percent of its value in just two days. 

Collins pleaded guilty to charges that, before this halt took place, he contacted his son, who was a major investor, and told him the news. Then-Representative Collins couldn't trade himself, as both his position on the board and the Australian halt prevented him from doing so. But his son, whose stock in the company was held in U.S. exchanges, could. Responding to the news from his father, Cameron Collins sold 1,391,500 shares of Innate stock between June 23 and June 26, when the drug trials became public. This allowed him to avoid about $570,000 in losses. During this time, he also passed on the information to his fiancée, who then told her own father, and they all made similar moves. 

The complaint charged that then-Representative Collins took active measures to prevent people from learning that his son had sold significant portions of his Innate stock before the public announcement. He issued statements to a local reporter outright saying that his son liquidated all his shares after the halt was lifted and had suffered substantial financial loss, shaping the statement to give the impression that he had not sold shares prior to the announcement. An email written by him explicitly said "We want this to go away," referring to all the press coverage surrounding Innate. 

Collins was initially defiant, denying that he told his son anything about the medical trial results ahead of the trading halt, and while he initially declined to seek re-election, he eventually reversed course and put $50,000 of his own money into a narrowly victorious campaign. Despite this win, however, he resigned from office Monday in anticipation of a guilty plea. 

New York Gov. Andrew Cuomo said he wants to hold a special election to fill his seat soon, but noted that state law prevents him from scheduling a vote on Nov. 5, the date of the general election. He floated the presidential primary in April as a possible date. Republican State Committee Chairman Nick Langworthy, on the other hand, wants a new election called immediately, as the district is strongly Republican. 

Click here to see more of the latest news from the NYSSCPA.