Re­pub­li­can congressman ar­rested

New York’s Collins, 2 oth­ers ac­cused of in­sider trad­ing in biotech firm

USA TODAY International Edition - - NEWS - Sean Lah­man, Steve Orr and Meaghan M. Mc­Der­mott

“Wow. Makes no sense. How are these re­sults even pos­si­ble???”

Rep. Chris Collins In an email, af­ter hear­ing about the drug trial

Rep. Chris Collins was ar­rested Wed­nes­day morn­ing af­ter a fed­eral grand jury in­dicted him on in­sider trad­ing charges as well as ly­ing to fed­eral agents.

Collins and his co-de­fen­dants sur­ren­dered to au­thor­i­ties Wed­nes­day morn­ing in Man­hat­tan, ac­cord­ing to the U.S. At­tor­ney’s Of­fice for New York’s South­ern Dis­trict.

All three pleaded not guilty when they were ar­raigned in fed­eral court, with bail for each set at $500,000. They are set to re­turn to court Oct. 11.

“These charges are a re­minder that this is a na­tion of laws and that ev­ery­body stands equal be­fore the bar of jus­tice,” said Ge­of­frey Ber­man, the U.S. at­tor­ney for the South­ern Dis­trict of New York. “Congressman Collins, who by virtue of his of­fice helps to write the laws of this na­tion, acted as if the law didn’t ap­ply to him. The charges to­day demon­strate once again that no mat­ter what the crime or who com­mit­ted it, we stand com­mit­ted in the pur­suit of jus­tice with­out fear or fa­vor.”

A fed­eral in­dict­ment charges Collins, his son Cameron, and Stephen Zarsky, the fa­ther of Cameron’s fi­ancee, with wire fraud, con­spir­acy to com­mit se­cu­ri­ties fraud and seven counts of se­cu­ri­ties fraud.

Collins is also charged with mak­ing false state­ments to the FBI.

Wed­nes­day night, Collins vowed to fight the “mer­it­less” ac­cu­sa­tions and said he would con­tinue his Novem­ber elec­tion bid in New York’s 27th Con­gres­sional Dis­trict.

Specif­i­cally, Collins is ac­cused of re­ceiv­ing in­side in­for­ma­tion about neg­a­tive clin­i­cal trial tests con­ducted by In­nate Im mu not her a pu ti cs, an Aus­tralian biotech com­pany with which he has long been as­so­ci­ated.

He then is ac­cused of pass­ing that in­for­ma­tion on to his son, prompt­ing the son and oth­ers to sell 1.78 mil­lion In­nate shares shortly be­fore the bad news was made pub­lic in June 2017 and the share price plunged from 45 cents to 31⁄2 cents, a 92 per­cent de­cline.

Those oth­ers in­cluded Cameron Collins’ fi­ancée, Lau­ren Zarsky; her mother, Dorothy, and other friends and fam­ily mem­bers.

They avoided losses of $768,600, ac­cord­ing to the com­plaint filed by the Se­cu­ri­ties and Ex­change Com­mis­sion.

“Congressman Collins had a le­gal duty to keep that in­side in­for­ma­tion se­cret un­til it was re­leased by the com­pany to the pub­lic,” Ber­man said. “In­stead, as al­leged, he de­cided to com­mit a crime. He placed his fam­ily and friends above the pub­lic good.”

The ex­per­i­men­tal drug in ques­tion, a com­pound known as MIS416, is a treat­ment for sec­ond-stage mul­ti­ple scle­ro­sis. Clin­i­cal tri­als to de­ter­mine if the com­pound was safe and ef­fec­tive had be­gun in Oc­to­ber 2014, ac­cord­ing to the in­dict­ment. MIS416 was In­nate’s pri­mary prod­uct, and the com­pany’s for­tunes were di­rectly tied to the suc­cess of the tri­als.

On June 22, 2017, In­nate’s lead­er­ship learned the tri­als had de­ter­mined the com­pound “lacked ther­a­peu­tic ef­fec­tive­ness.”

The com­pany’s chief ex­ec­u­tive, Si­mon Wilkin­son, emailed mem­bers of the board of di­rec­tors that day, in­clud­ing Collins, at 6:55 p.m. “I have some bad news to re­port,” his email said, ac­cord­ing to the in­dict­ment. The tri­als had found the ex­per­i­men­tal drug was a “clin­i­cal fail­ure.”

The SEC com­plaint al­leges that the congressman called Cameron and told his son the bad news about the trial. He con­veyed that in­for­ma­tion “know­ing that it was in breach of his du­ties to In­nate and an­tic­i­pat­ing that Cameron Collins would use it to trade and tip oth­ers,” the in­dict­ment al­leged.

Ber­man said fol­low­ing that phone call, Cameron Collins drove to his fi­ancée’s par­ent’s home. At 9:34 p.m., the fi­ance’s mother, Dorothy Zarsky, called her bro­ker to ini­ti­ate sell­ing her stock.

Over the next four days, Cameron Collins sold more than 1 mil­lion shares of In­nate stock, Ber­man said. He avoided losses of $570,900, ac­cord­ing to court doc­u­ments. Stephen Zarsky avoided losses of $143,000.

Rep. Chris Collins, R-N.Y., was ar­rested Wed­nes­day. CHIP SOMODEVILLA/GETTY IM­AGES

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