President Trump is unlikely to be happy about the latest creature that law enforcement wants removed from the Washington swamp.
"Federal prosecutors charged Rep. Chris Collins (R-N.Y.), President Trump's first congressional supporter, with insider trading on Wednesday, alleging the New York Republican schemed with his son to avoid significant losses on a biotechnology investment," The Washington Post reported Aug. 8. Collins' son, Cameron Collins, and Stephen Zarsky, the father of Cameron Collins' fiancee, "were also charged on multiple counts of securities and wire fraud and pleaded not guilty."
What prosecutors describe in their indictment is an all but textbook case of insider trading, so blatant that it would no doubt be dismissed as too unbelievable if it turned up in the plot of a television show or novel. According to the indictment, Chris Collins, an investor in and a board member for Australian biotechnology company Innate Immunotherapeutics, received a call at a June 2017 White House garden party that the company's flagship multiple sclerosis drug flunked its clinical trial. Chris Collins did not sell his shares, perhaps because they were held in Australia, where the company froze sales pending the announcement. But he allegedly tipped off son Cameron Collins, who kept his share of the investment in the United States, where sales of shares in the company did not stop. The son unloaded his shares, as did his fiancee, his fiancee's father, and a number of their friends and relatives whom, prosecutors say, they immediately contacted.
The younger Collins might have thought he was being a good friend: Innate's stock price plunged 92 percent when news of the failed trial broke. The people who allegedly sold based on the insider information jointly avoided approximately $768,000 in losses. The feds took notice and investigated via phone calls, texts, emails and, eventually, interviews with federal authorities. This, in turn, led to charges not just of insider trading, but lying to those authorities. (As Martha Stewart could attest, not telling the truth about stock trades when investigators come calling is a very bad idea.)
Surely no one could be this dumb or greedy? Well, this is the American oligarchy at work in the era of Trump. Perhaps Chris Collins thought his friendship with Trump made him immune from prosecution. Or perhaps he simply got cocky. The Daily Beast reported in April 2017 that Collins pushed legislation favorable to the company multiple times. He also took advantage of a loophole in congressional regulations to avoid reporting that he owned shares in the company, and persuaded a number of members of Congress and staffers to buy shares in the company, including former Health and Human Services Secretary Tom Price.
The good-government advocacy group Public Citizen asked that both Collins and Price be investigated for insider trading in the matter of Innate, among other stocks, in January 2017. (Price sold his shares to comply with government ethics requirements after Trump nominated him for the HHS job — and after more than doubling his initial investment. Lucky!) A few months later, Citizens for Responsibility and Ethics in Washington also flagged suspicious purchases of shares in the company by a number of Republican members of Congress. Again, all of these developments came weeks before the stock sales that led to Wednesday's federal indictment. Then late last year, the Office of Congressional Ethics concluded there was "substantial reason to believe" Collins acted on inside information.
There is a long and sorry history of insider trading by members of Congress from both parties. A 2011 study found congressional portfolios routinely outperformed market averages. That's possibly because insider trading by members of Congress was perfectly legal until 2012, when Barack Obama signed legislation banning it into law. But just how lax is Congress's current standard? Financial news network CNBC has tighter rules for its newsroom employees, banning them from owning any individual stocks. And all they do is yammer about them.
Collins enjoyed an estimated net worth of $66 million in 2015. It seems a pity both he and his son didn't remember that before getting charged up over $768,000. With that sort of wealth, the senior Collins could have made everyone whole out of his pocket change if he felt that bad about the ill-fated investment and avoided this entire sorry mess. But in Capitol Hill's rotten system, one can hardly blame Collins if he assumed that he'd get away with it again.
Helaine Olen is a contributor to the PostPartisan blog and the author of "Pound Foolish: Exposing the Dark Side of the Personal Finance Industry." Her work has appeared in Slate, the Nation, the New York Times, the Atlantic and many other publications. She serves on the advisory board of the Economic Hardship Reporting Project.
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