NEW YORK (NYTIMES) - Republican congressman Chris Collins, one of President Donald Trump's earliest and most vocal supporters, was charged with insider trading on Wednesday (Aug 8).
He was accused of tipping off his son and others to sell stock in an Australian pharmaceutical company before the results of one of its failed drug tests became public, federal prosecutors said.
The charges against Collins stem from his involvement with Innate Immunotherapeutics, a drugmaker based in Sydney whose primary business was the research and development of a medication designed to treat a form of multiple sclerosis, according to an indictment.
Collins, 68, was attending the Congressional Picnic at the White House in June 2017 when he received a private email from the company's chief executive that a test for a potentially lucrative experimental drug had failed, the indictment said.
Fifteen minutes later, the congressman, who sat on the firm's board of directors and was one of its largest shareholders, called his son, Cameron Collins, who sold his shares in the company, the indictment said.
Collins did not sell his own shares, the indictment said.
As laid out in a federal indictment, Collins engaged in brazen acts of insider trading, starting with an email from the company's chief executive that the firm's sole product had failed its scientific trials.
That led to panicked phone calls to his son, Cameron Collins, prosecutors said, and ultimately to the sale of more than a million shares of the company's stock before news of the failure became public.
The sell-off spared Collins and his son more than US$570,000 (S$770,000) in losses, the indictment said.
The case, brought by the US attorney's office in Manhattan, cast what could be a long shadow in the House.
At least five Republican lawmakers were shareholders in Innate Immunotherapeutics at the time of the Collins family sell-off.
And it raised a more fundamental question: How could a member of Congress, sitting on the House committee with jurisdiction over health-care companies, be on the board of an Australian pharmaceutical-maker and its largest shareholder?
Hours after the charges were announced, House Speaker Paul Ryan stripped Collins of his seat on the Energy and Commerce Committee and called for the House Ethics Committee to look into the allegations.
"Insider trading is a clear violation of the public trust," Ryan said in a statement.
"We will answer the charges filed against Congressman Collins in court and will mount a vigorous defence to clear his good name," Collins' lawyers, Jonathan Barr and Jonathan New, said in a statement.
"It is notable that even the government does not allege that Congressman Collins traded a single share" of the company's stock.
According to a federal indictment, Innate Immunotherapeutics' chief executive, Simon Wilkinson, sent the email to the company's board of directors, including Collins, at 6.55pm on June 22, 2017, explaining that the test for the drug, known in its trial stage as MIS416, had failed.
Collins, prosecutors say, was attending the Congressional Picnic at the White House at the time.
Fifteen minutes later, the indictment said, he wrote back to Wilkinson, saying, "Wow. Makes no sense. How are these results even possible???"
Phone records included in the indictment show that Collins immediately called his son, missing him six times before they had a brief conversation.
Prosecutors contend that it was during that conversation that Collins told his son about the failed drug test.
The following morning, at 7.42am, the indictment said, Cameron Collins placed an online order with his brokerage firm, selling more than 16,500 shares of Innate Immunotherapeutic stock.
Later that day, prosecutors said, Cameron Collins, 25, placed 17 more orders to sell the stock. Three days later, he placed an additional 36 sell orders.
He also passed the tip on to others including his fiancee, who was not named in the indictment, and his fiancee's father, Stephen Zarsky, 66, who was also charged.
On June 27, 2017, the day after Cameron Collins made his last trades selling Innate Immunotherapeutic stock, news of its failed drug test became public and the stock plummeted by more than 90 per cent.
Prosecutors said that Chris Collins took steps to hide his involvement in the sale of the stock. For example, on June 28, 2017, one of his staff members issued a statement denying he had personally sold any shares and asserting his son had only sold shares after a halt on the trading of the stock had been lifted, a move that caused him "substantial financial loss."
Prosecutors said that the statement was "written in a manner designed to mislead the public."
Collins was the first member of Congress to endorse Trump, in February 2016, and that decision transformed him from a backbench member to one of the few lawmakers with any kind of relationship with the president after Trump won the White House that November.
Early in the Trump administration, he served as an informal liaison for the White House to Capitol Hill and would brag about how the president would call him on his cellphone unannounced.
His endorsement also helped make Collins a fixture on cable television, with numerous appearances on the CNN programme of Chris Cuomo. There was a winking irony to those appearances, as Collins had long feuded with the host's brother, Andrew M. Cuomo, the Democratic governor of New York.
Collins said last year of the elder Cuomo, "You can't believe anything this governor says."
Cuomo pushed for his lieutenant governor, Kathy Hochul, to run against Collins this year instead of seeking re-election, but Hochul has said she prefers her current role.
Collins first won the Buffalo-area seat in 2012, defeating Hochul. The 27th District is one of New York's most conservative; it is where Trump won his highest percentage of votes in the state, with nearly 60 per cent.