The three-term congressman’s infectious enthusiasm for Innate Immunotherapeutics, the tiny biotech firm, led to his indictment Wednesday, when he and several other investors were accused of insider trading, and his announcement Saturday that he would suspend his re-election campaign.
Prosecutors said that he tipped off his son to the poor results of the company’s clinical drug trial for a notoriously intractable form of multiple sclerosis before they were public, allowing the son and others to dump their stock and save hundreds of thousands of dollars. Collins sat on the company’s board until May, and at one point was its largest shareholder.
The stock scandal has rippled through Congress, where his favorite stock tip had enticed at least seven former or current House Republicans into investing along with him, his two grown children and other friends. It provided new ammunition for Democrats seeking to take back the House.
In his statement, Collins called the insider trading charges “meritless” and vowed to fight them to have his “good name cleared of any wrongdoing.”
While the other congressmen who invested in Innate were not implicated in the indictment, the allegations against Collins have revived calls for stricter rules about financial investments or corporate board seats held by members of Congress while they are sitting on committees with oversight into those businesses.
Collins may have been the largest investor in health companies on the House Energy and Commerce Committee, but one-third of its members also bought and sold biotech, pharmaceutical and medical device stocks, an analysis by The New York Times has found. Republican Reps. William Long II, Larry Bucshon and Markwayne Mullin served with Collins on the panel’s health subcommittee, and each invested in Innate. The subcommittee weighed in on topics ranging from the Food and Drug Administration’s authority over speeding up approval of new drugs to the Affordable Care Act.
Beyond Innate Immunotherapeutics, Collins, among the wealthiest members of Congress, has held leadership roles in other biotech companies that were little known or mentioned on Capitol Hill. Until this past week, he was chairman of the board of directors of ZeptoMetrix, a private lab company based in Buffalo, New York, that he co-founded and that has received millions of dollars in federal contracts, according to government records. He also reported owning between $25 million and $50 million in shares of the company, but has since transferred an unknown amount into his wife’s name, a company spokesman said. In June, he sold as much as $1 million of stock in Chembio Diagnostics, a medical tests and equipment manufacturer, according to his ethics disclosure forms.
Collins did not disclose these ties in committee hearings when topics overlapped with his business interests, including the development of a test for the Zika virus and whether the FDA should more closely regulate some types of lab tests. Earlier, in 2013, he brought up the experimental drug that Innate was developing in a hearing about brain research, but did not mention his financial stake in the company.
“Mr. Collins had no business serving on this publicly traded company from the get-go,” said Meredith McGehee, executive director of Issue One, a Washington ethics watchdog, who noted that such a practice was not permitted in the Senate. “The House needs to update its rules.”
Since 2012, a federal law has prevented members of Congress from trading stocks based on confidential information they receive as lawmakers. Members of both chambers may hold stocks and members of the House of Representatives may serve on boards as long as they disclose it. Generally, lawmakers don’t have to recuse themselves from a vote or other action that might affect their holdings unless they are virtually the only investor who would benefit.
While many lawmakers have opted to invest using broad mutual funds to avoid potential conflicts on individual holdings, some — like Collins — have not.
In July 2017, a congressional ethics office found that Collins may have violated ethics rules by asking the National Institutes of Health for help with the design of Innate’s now-failed clinical trial. Last week, House Speaker Paul Ryan stripped Collins of his seat on the energy and commerce committee and asked the House Ethics Committee to investigate the allegations of insider trading.
Collins’ involvement with Innate dates to 2005, when he leveraged his wealthy circle of friends and neighbors — many of whom would become political donors — to help bail out the company. One investor was Lindy Ruff, former coach of the Buffalo Sabres, the congressman told federal ethics investigators last year. “I live in an upscale neighborhood with people that have means,” he explained in the interview.
He became acquainted with Innate’s chief executive, Simon Wilkinson, because ZeptoMetrix, his other company, was supplying HIV to Innate, then called Virionyx, which was developing a treatment for the disease using antibodies harvested from a herd of New Zealand goats.
Collins eventually became Innate’s top shareholder and a member of the board, sticking with the company after it pursued a treatment for multiple sclerosis and changed its name to Innate. Many investors had lost money with Virionyx. “They burned through an incredible amount of money back then,” Collins told the ethics investigators. “It was toxic, a toxic name.”
Collins won election to Congress in 2012, in part on his reputation as a businessman who could turn around failing companies. He cleared his financial entanglements with House ethics officials, he told investigators, and was allowed to remain on the boards although he could not accept any compensation. In some cases, he said, he switched his company ownerships to his wife’s name.
Last year, however, the Office of Congressional Ethics, a quasi-independent, bipartisan entity, not only concluded that Collins may have improperly used his position to benefit Innate but also said that he might have shared nonpublic information — which is illegal — about the company when he frequently talked to friends and family about developments.
Collins said Wilkinson would visit Buffalo on his trips to the United States. “I’d call all my friends in,” he said in his interview with ethics investigators. “We’d have wine and some hors d’oeuvres and he’d update everybody on what was going on.”
Wilkinson said in an email Wednesday that the company considers the indictment case against Collins to be a private matter, and declined to comment.
Collins has denied any wrongdoing, saying that his interest in multiple sclerosis stems from high rates of the disease in his district in western New York and that his visit to the NIH was “just nosy fun.” One of his aides also indicated that a family member had suffered from the disease.
His involvement with Innate surfaced in December of 2015, and came up again during the confirmation of Tom Price for secretary of the Department of Health and Human Services. Price’s active investment in pharmaceutical and health care stocks drew scrutiny — and calls for an investigation — from Democrats. Price divested from his stock in Innate before becoming secretary, and later resigned from his Cabinet post after his use of expensive charter flights on government trips became public.
By comparison, little attention has been paid to Collins’ connection to ZeptoMetrix, a company he helped found in 1999 that supplies viruses, bacteria and other products to laboratories around the country.
Collins has said that his 50-percent holdings in ZeptoMetrix are in the name of his wife and daughter. The family’s interest in the company ranges from $25 million to $50 million, according to Collins’ financial disclosure forms. They earned $1 million to $5 million in interest from ZeptoMetrix. His wife, Mary Collins, receives a salary from the company, according to the disclosure.
Christopher Collins resigned from the board this past week, according to ZeptoMetrix’s chief executive, Shawn R. Smith.
ZeptoMetrix has received more than $3 million in federal contracts since 2004, according to public records, and Collins has described the connection between the NIH and ZeptoMetrix as “a very long-standing relationship.”
In an interview Friday, Smith said most of the federal contracts occurred years ago, before Collins took office, and mainly involved sales of products like viruses and bacteria to government scientists.
At two congressional hearings in 2016 and 2017, Collins asked detailed questions about development of a test for the Zika virus, not revealing his connection to ZeptoMetrix, which was selling the virus to laboratories that were developing tests for the disease. He also did not disclose his ties when he grilled an official with the FDA in 2015 about his concerns over more closely regulating certain laboratory tests.
Some ethics experts said that even if rules don’t formally prohibit it, close affiliations with a company — like serving on its board — are imprudent. “The advice I would give people is don’t serve on a corporate board because you will be suspect as a conduit for inside information even if in fact you are not,” said Stanley Brand, a former House general counsel and longtime criminal defense lawyer.
A spokeswoman for Collins on Friday pointed to statements that he made during a hearing in 2016 about bioresearch labs that disclosed that he founded and led a lab company. However, Collins did not reveal during the hearing that he remained on its board, nor his ongoing financial stake.
In January, the outgoing chief executive of ZeptoMetrix, Gregory R. Chiklis, sued the company in New York State Supreme Court, accusing the company of financial irregularities, including paying “phantom employees” annual salaries of $500,000. Chiklis also said that Collins “unilaterally” made most decisions.
The case was later settled, and Chiklis did not return calls for comment. But Smith, who replaced Chiklis, said Collins rarely weighed in on company business.
Collins had an estimated net worth of $43.5 million in 2017, according to Roll Call. When the company’s stock plunged last year, federal prosecutors have said Collins did not sell his own shares because he knew he was under investigation. He likely lost millions. According to his 2017 disclosure form, filed in April, Collins owned between $1 million and $5 million in Innate Immunotherapeutics stock.
In June of this year, financial disclosure records show he sold between $15,000 and $50,000 in stock in Innate, his only reported sale of the stock since it lost most of its value.
Oddly enough, some of the other Republican congressmen or their spouses who invested in Innate did so in January 2017, the same month that Price’s investments came under public scrutiny. Rep. John Culberson of Texas bought $13,982 in shares, and lost $9,194 when he sold it in June of last year, two weeks before the company announced that the drug trial had failed.
Mullin of Oklahoma made the largest investment; between $100,001 and $250,000, according to his financial disclosure form. He did not list a sale, nor did Long of Missouri, who invested between $15,001 and $50,000, according to his report. Colorado Rep. Doug Lamborn, whose wife had purchased between $15,001 and $50,000, reported a sale on June 27, of less than $1,000, suggesting that the couple lost most of the investment.
Rep. K. Michael Conaway of Texas reported making two investments of between $1,000 and $15,000 in Innate, around the same time last year.
Since its drug trial failed, Innate Immunotherapeutics has abandoned its multiple sclerosis treatment and announced it had acquired a company that is studying cancer drugs. Its stock is currently trading at less than 20 cents per share.
In his interview last year with ethics investigators after the MS drug trial failed, Collins sounded a note of regret over his proselytizing for the stock. Of his friends, he said, “everyone heard the presentation,” and, he added, “ultimately, it failed, so obviously they should’ve asked more questions than they did.”
This article originally appeared in The New York Times.
Katie Thomas and Sheila Kaplan © 2018 The New York Times