Return to Transcripts main page

Inside Politics

Collins Arrested on Insider Trading Charges; Southern District of New York News Conference. Aired 12-12:30p ET

Aired August 08, 2018 - 12:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

(COMMERCIAL BREAK)

[12:00:26] JOHN KING, CNN ANCHOR: Welcome to INSIDE POLITICS. I'm John King. Thank you for sharing your day with us.

Major breaking news unfolding this hour. A Republican congressman arrested, charged with insider trading. Prosecutors sharing key details of the case any moment. We'll take you there live when that happens.

Plus, the star witness in the Paul Manafort trial faces scathing cross-examination. The main charges predate 2016, but the testimony also alleges a Paul Manafort effort to use his top Trump campaign role to curry favor.

And candidates backed by President Trump hold tiny leads after the preliminary vote counts in Ohio and Kansas. Team Trump brags about the president's clout, but most Republicans see the results as a sign of major midterm trouble.

(BEGIN VIDEO CLIP)

CHARLIE DENT (R), FORMER U.S. CONGRESSMAN: This race should not have even been a contest. If I'm a Republican in a swing or marginal district right now, I'm very concerned. If -- you know, if -- just like Conor Lamb won and he won by 1,000 votes, but had he lost by 1,000 votes, I'd still be concerned. It's clear that the energy and intensity is on the Democratic side.

(END VIDEO CLIP)

KING: To those election results a bit later.

But we are standing by this moment for a major news conference in Manhattan. That's where prosecutors will unveil insider trading allegations against Republican Congressman Christopher Collins of New York. His district is in the northwest corner of the state, up near Buffalo. But you may recognize the name and the face no matter where you live. Collins is a frequent TV deferred of President Trump. In fact, the first member of Congress to endorse candidate Trump.

The government alleges Congressman Collins, who sits on the board of an Australian pharmaceutical company, knew in advance that a drug it was testing didn't work. Collins allegedly warned his son, who then sold his stock in the company. When news of that unsuccessful test went public, the stock plunged by more than 90 percent.

CNN's Phil Mattingly is following this story for us from New York.

Phil, take us inside the indictment. Tell us about the accusations.

PHIL MATTINGLY, CNN CONGRESSIONAL CORRESPONDENT: Well, in the 30-page indictment, they really lay out in detail what you were just talking about, John. Federal prosecutors charging both -- or Congressman Collins, his son and another individual with 13 counts of securities fraud, wire fraud and false statements. At the core of the indictment is the allegation that they used non-public information that was obtained by Congressman Collins, via his role on the board from the CEO, to make stock trades to, in essence, save themselves money when a public trial for the drug was about to be announced as a failure.

I want to read a little bit from the complaint, or from the complaint. It says, quote, MIS416 had the potential to be an enormously profitable if the drug trial was successful. The drug, however, failed the drug trial. The public announcement of these results caused the stock price in Innate, the company, to drop by 92 percent. In or about June 2017, Christopher Collins, the defendant, violated the duties he owed to Innate by passing material non-public information regarding the drug trial results to his son, Cameron Collins, the defendant, so that Cameron Collins could use that information to make timely trades in Innate stock and tip others.

And a detail that was pretty stunning from the actual complaint itself, those phone calls, or at least the initial ones, from the congressman to his son, they took place on the grounds of the White House, during the White House Congressional Picnic. Now, anybody who's been paying attention to Chris Collins on Capitol Hill the last couple of years, it was no secret his role in this company, his belief in this company, how much he touted this company. He would talk about it with his colleagues. He would talk about it on the House floor. He would talk about it in the House speaker's lobby. And his lawyers are already making clear they plan on a robust defense.

I want to read one piece of a statement which says, quote, it is notable that even the government does not allege that Congressman Collins traded a single share of Innate stock. We are confident he will be completely vindicated and exonerated.

Now, it's worth noting, he will be arraigned at 2:30 here in Manhattan. And I think it's also worth noting, John, that this was not the first time Congressman Collins and his relationship with this company had come to the fore. Obviously, he had been talking about it regularly. There were also significant ethical concerns. The Office of Congressional Ethics did a detailed investigation into his ties to the company, including showing evidence that he had been lobbying members of the government about the company itself. He sat on the committee, the House Energy and Commerce, that oversaw the company. And the House Ethics Committee was engaged in its own investigation related to this. So that issue is not new. But the complaint that was laid out today, that, John, absolutely was.

KING: And we're going to hear more of the details in about a minute and a half. Geoffrey Berman is the United States attorney for the Southern District of New York. You see that podium there on the bottom right of you screen.

Phil, obviously we're 90 days from a midterm election. Innocent until proven guilty. The congressman says he will fight this vigorously. What, though, is the reaction of the Republican leadership, which cannot be happy, a, with the indictment and, b, the timing.

[12:05:07] MATTINGLY: Yes, no question about it. Look, Speaker Paul Ryan has already put out a statement. And the key thing that the speaker can actually do here is strip the congressman of that key committee position, and that is exactly what he's doing.

In a statement, Speaker Paul Ryan saying, insider trading is a clear violation of the public trust. Until this matter is settled, Republican Collins will no longer be serving on the House Energy and Commerce Committee.

Nancy Pelosi put out a statement talking about a rampant culture of corruption in the Republican Party, clearly spinning to the political side of this, and calling on the House Ethics Committee to accelerate the investigation.

Obviously, you have the legal side of this, John, but don't forget about the political side. Democrats are seizing on this, using it as a data point, innocent or guilty, to underscore why they believe Republicans have been in charge in Washington, haven't been able to deliver, and actually undercut everything President Trump promised on the campaign trail about the swamp, John.

KING: Phil, stand by.

And let's listen to this press conference. It's about to unfold. We have Paul Callan, our legal analyst, standing by as well with me here in studio. To share their reporting and their insights after we listen in here is CNN's Dana Bash, Michael Shear of "The New York Times," Karoun Demirjian of "The Washington Post," and CNN's Nia-Malika Henderson.

But, first, we're going to hear from Geoffrey Berman and the FBI investigators up in New York as we wait for this event to unfold.

You can see, they're bringing the props into the room.

As they start to do that, let's just start our conversation and forgive me, I -- here we go. Let's go.

GEOFFREY BERMAN, U.S. ATTORNEY, SOUTHERN DISTRICT OF NEW YORK: U.S. attorneys for the Southern District of New York.

Today we announced criminal charges against Christopher Collins, a United States congressman. Congressman Collins is charged with insider trading and lying to the FBI. As alleged in the indictment, Congressman Collins cheated our markets and our justice system in two ways. First, he tipped his son to confidential, corporate information at the expense of regular investors, and then he lied about it to law enforcement to cover it up. Also charged is his son, Cameron Collins, and Steven Zarsky, the father of Cameron's fiance.

These charges are a reminder that this is a nation of laws and that everybody stands equal before the bar of justice.

Now I'd like to go into the details of the allegations a little more.

In addition to serving in the House of Representatives, Congressman Collins was also on the board of directors of Innate Immunotherapeutics, a publicly traded company that was developing a drug for multiple sclerosis. In June of 2017, Congressman Collins was told some confidential and highly sensitive information about Innate. Information that was not yet made public. Namely, that Innate's main drug, the drug Innate was developing to be the backbone of its company, was a total failure. This was devastating information for the company. Congressman Collins had an obligation, a legal duty, to keep that information secret until that information was released by the company to the public. But he didn't keep it secret. Instead, as alleged, he decided to commit a crime. He placed his family and friends above the public good.

Congressman Collins was a major investor in Innate and so was his son Cameron. The congressman knew he couldn't sell his own shares for personal and technical reasons, including that he was already under an investigation regarding Innate by the Congressional Ethics Office. The crime that he committed was to tip his son Cameron so that Cameron and a few select others could trade on the news while the investing public remained in the dark.

As the indictment alleges, that's exactly what they did. His son Cameron sold. Cameron's fiance sold. The father of the fiance Zarsky, sold. Mr. Zarsky's wife sold. Other friends and relatives sold. All because Congressman Collins violated his duty to keep Innate's information secret.

And when the news of the drug's failure became public, the stock plummeted. In total, the conspirators used the inside information to avoid over $750,000 in losses.

[12:10:15] But Congressman Collins couldn't keep his crime a secret forever. The FBI asked to interview him. And instead of telling the truth, he lied. And so did Cameron Collins. And so did Stephen Zarsky. By lying to the FBI, they compounded their insider trading crime with the crime of criminal cover-up.

Now I'd like to go over to these two charts which summarize some of the allegations in the indictment.

This first chat is a tipping change. It demonstrates the flow of the illegal insider information and the trading, the illegal trading, on that information. At the top of the chain is Congressman Collins. He had an obligation as Innate board member, when he received confidential corporate information, to keep that information secret until the company announced it to the public. In total disregard of that obligation, minutes after Congressman Collins received the devastating, highly confidential news that Innate's drug had failed its drug trial, Congressman Collins tipped that inside information to his son so that his son could trade.

Cameron Collins, when he received that illegal inside information, he did two things, both of which are illegal. He sold stock based on that inside information and avoided $570,000 in losses.

And he also took that illegal inside information and tipped others. He tipped his fiance. He tipped his fiance's wife (ph). He tipped his fiance's father. And he tipped a friend. All of whom traded on that illegal inside information. Stephen Zarsky, his fiance's father, avoided $143,000 in losses by trading on that information.

And he tipped others. He tipped his brother. He tipped his sister. And he tipped a friend. Two of whom traded on the information. One attempted to trade on the information but was unable.

In total, the conspirators avoided losses of over $768,000 all because of the initial illegal insider trading tip by Congressman Collins.

In this chart, we set some of the key allegations in the indictment against a timeline, a backdrop, of the Innate share price.

On the evening of June 22, 2017, Congressman Collins was at a congressional picnic. And at 6:55, he received an e-mail from the CEO of Innate informing him of the horrendous news that the drug had failed its trial. At 7:10 p.m., Congressman Collins responded to that e-mail. So as the indictment alleges, at least at 7:10 p.m., Congressman Collins was aware of the inside information.

A minute later, Congressman Collins attempted to call his son. In a period of five minutes, there are six unsuccessful calls. On the seventh call, 7:16 p.m., as alleged in the indictment, Congressman Collins tips -- illegally tips his son Cameron about the drug trial results so that his son Cameron could trade on those results.

Later that evening, on June 22nd, after Cameron Collins has the illegal insider trading information, Cameron Collins drives with his fiance to his fiance's parents' house. They arrive at the house at 9:17 p.m. Less than 20 minutes later, at 9:34 p.m., the fiance's mother is on the phone with her broker beginning the process of selling her shares of Innate.

[12:15:23] The next morning, on June 23rd, at 7:42 a.m., Cameron Collins begins the process of selling his shares of Innate.

During June 23rd and June 26th, Cameron Collins sells approximately 1.39 million shares of Innate, prior to the market close of June 26. After the market closes, Innate announces to the public that its drug had failed the trial. And the next day, the drug price, the price of Innate, falls off a cliff. It drops 92 percent in value in a single day. This was the drop that was anticipated by the co-conspirators. This was the drop in value that the co-conspirators avoided by selling their shares before the public announcement. And they could only sell those shares by virtue of the initial tip of inside information by Congressman Collins.

A case of this type and significance, obviously, involves the SEC and the FBI, and their representatives are standing up here with me today. To my left is my good friend Bill Sweeney, the assistant director in charge of the FBI's New York field office. And to the far left is John Brosnan, the special agent in charge of the FBI New York office criminal division. The FBI's work on this case was spectacular, and I want to thank them for their professionalism and dedication. We work with the FBI on so many important cases, and it is always a privilege.

To the left of Bill is Stephanie Evakia (ph) and Steve Pecan (ph), who are co-directors of the SEC's division of enforcement. I want to thank them and the SEC for their hard work on this matter.

Last, I want to acknowledge and thank the career prosecutors in my office handling the case. To my right is Max Nicholas (ph), Damian Williams (ph), Bob Allen (ph), Scott Hartman (ph) and the co-chiefs of our securities and commodities fraud task force, Tim Casulis (ph) and Jason Callan (ph).

Congressman Collins, who, by virtue of his office, helps to write the laws of our nation, acted as if the law didn't apply to him. The charges today demonstrate once again that no matter what the crime and no matter who committed it, we stand committed in the pursuit of justice without fear or favor.

I would now like to invite to the podium Bill Sweeney.

WILLIAM SWEENEY JR., ASSISTANT DIRECTOR IN CHARGE, FBI NEW YORK FIELD OFFICE: Thank you, Geoff.

And good afternoon, everybody.

U.S. Representative Christopher Collins sat on Innate's board of directors for a period of more than three years, spanning the run-up to the drug trial announcement in mid-2017. Collins himself was the company's largest shareholder.

In or about the summer of 2017, a drug designed to treat a debilitating form of multiple sclerosis had entered the late stages of a phase 2B clinical trial. This drug, MIS-416, was the only viable drug in the pipeline for Innate. This is significant in that the company's value was nearly completely wrapped up in the success of the clinical trial and subsequent a phase three trial.

On the evening of June 22, 2017, collies received an e-mail informing him that MIS-416 had failed its clinical trial. Electronic records indicate his initial shock at having received the news. The drug once anticipated to hold billions of dollar in value would now be the cause of significant financial loss for Innate and, of course, its investors, many of whom shared a personal relationship with Congressman Collins.

[12:20:06] While the congressman was legally bound to keep his information confidential until the trial results were released to the investing public four days later on June 26th, we allege he did not.

The indictment charges that Collins immediately began contacting the family and friends he had brought into the fold. This set off a ripple effect in which many investors, directly or indirectly connected to Congressman Collins, were notified. Most of them quickly sold their shares. Innate's stock price plummeted 92 percent on the first trading day following the public announcement. But Collins' conspirators had saved themselves over $750,000 in losses.

Collins himself, having been prohibited from selling his shares for various reasons, did not avoid a financial loss. Despite this fact, his alleged actions brought him face-to-face with federal agents who had become aware of the crime that had been committed. When questioned by law enforcement about the alleged dealings, Congressman Collins, his son Cameron, Cameron's fiance's father Stephen Zarsky, lied, plain and simple. Today they are charged with insider trading and lying to federal law enforcement agents.

While Collins may have thought that giving his family and friends a heads-up about material, non-public information would benefit them in the long run, here's a better inside tip for those who think they can play by a different set of rules. Access to this kind of information carries with it significant responsibility. Especially for those in society who hold a position of trust. Act honorably and in accordance with the law and do not lie to special agents of the FBI.

Many thanks always to our partners, especially Geoff and your team of career prosecutors. Gentlemen, your work has been exceptional.

To the SEC, I'd personally like to thank Stephanie and Steve for your work. Your team has also been outstanding.

To John and John Casel (ph), who leads our white collar branch, and to your team of special agents and investigators, I want to extend my personal appreciation. Some are standing in the back in the shadows. But to Nick, John, Yolena (ph) and Tracy (ph), your work has been exceptional. What you do in the community matters and makes a difference.

Thank you.

KING: You've been listening there to William Sweeney. He's the assistant director in charge of the New York field office. That is Geoffrey Berman at the microphone now. He is the U.S. attorney in the Southern District of New York, outlaying in riveting detail insider trading charges against a sitting member of the United States Congress.

Paul Callan, our legal analyst, is with us.

And, Paul, the congressman says he is innocent. He says this did not happen. But when you watch Geoffrey Berman go through those charts and the tick tock of the timing and then to hear the FBI agent in charge talk about the electronic records they have, what does that tell you about this case?

PAUL CALLAN, CNN LEGAL ANALYST: Well, that presentation, I think, demonstrated a very clear-cut case against the congressman and members of his family and also the Zarsky family. These cases, sometimes they're dry and they're difficult to understand because of their complexity. But I think those charts demonstrated how a classic insider trading case works.

One, you have the congressman, who is on the board of directors of the company Innate. He gets inside information. And he has an obligation, they call it a fiduciary obligation, not to reveal confidential information. It may affect the stock price. It may affect the welfare of the company. Instead, he transmits that immediately to his son, who was a heavy stockholder in the company, and the son transfers it then to his father-if-law and other family members and we have a trading fest go on and during which they save $750,000 in potential losses because of the insider information. The poor members of the public, who find out about it the next day, get crushed because the stock plummets by over 90 percent.

So this is a classic insider trading case. And what's not classic about it, though, is we have a congressman who sat on the board of directors of a company, a pharmaceutical type company, that was doing, you know, a major trial in a case. And he's the one who's -- who makes the laws releasing to this. He's the one that the FDA answers to in these trials. So I think that's very surprising in and of itself.

KING: And forgive me, I'm not sure if this is a legal question or a common sense question in the sense that if this -- this played out as just detailed by the U.S. attorney, seven times trying to call his son on a cell phone, standing on the White House grounds because he's there for a congressional picnic. Then they go to the fiance's family's house. Then the next day they sell the stock. He knows he's under investigation already in the House. He knows his position in this company is publicly well known. Isn't it pretty stupid to think you could get away with this?

CALLAN: It's completely idiotic. I mean every -- every telephone call the feds can trace, every text message, by the way, a bunch of text messages were sent. And they -- they, you know, probably through the use of GPS and whatnot, they can even track the car. So -- and who knows what they were tracking because he's been under investigation by the -- by Congress and who knows, maybe by the FBI, for a long time.

[12:25:21] So, yes, it was -- it's the dumbest insider trading crime I've ever seen. We have to -- I have to say alleged, though, John, alleged insider trading.

KING: And, yes, you do. And the congressman says he will vigorously fight this and he is innocent until proven guilty. But, wow, what a case laid out there by the Southern District -- the U.S. attorney for the Southern District of New York.

Paul Callan, appreciate your legal insight.

Let's bring it into the room for a political conversation that is both legal and political.

Number one, I just want to remind people, and this is by no means to say that President Trump has anything to do with this. He has nothing to do with this based on everything we know before us. But the reason more than the people of upstate New York, know about Christopher Collins is because of his high profile in the Trump campaign, on television quite frequently.

I just want to show you a sampling, if you're trying to remember, I've heard this name before. I think I recognize that guy in the picture. He was the first congressman to endorse then candidate Trump and he frequently, during the campaign and during the Trump presidency, has been a TV defender.

(BEGIN VIDEO CLIP)

REP. CHRIS COLLINS (R), NEW YORK: Donald Trump has accomplished in this primary is unprecedented. He has spent very little money. He has rounded up the delegates that no one thought any of the original 17 would have by this point. Donald Trump is absolutely brilliant.

Donald Trump's a winner. Donald Trump wants to win.

The temperament and the personality of Donald Trump is exactly what America wants.

The energy behind Donald Trump is like no one has ever seen.

(END VIDEO CLIP)

KING: Now, again, I do that, there's no connection to President Trump here. It's just that this is a face that many Americans will recognize when they see it because of his high-profile here. It's also the fact, just -- this is the stuff that you want to know why -- one of the reasons Donald Trump's president. Why America hates Washington. A congressman standing on the White House grounds alleged to have called his son and tipped him off in an insider trading scam.

DANA BASH, CNN CHIEF POLITICAL CORRESPONDENT: If you saw this on "House of Cards" and they said, OK, so the president's going to be there. He's going to have the congressman over for a picnic. He's going to get the call from this CEO and he's going to call his son, you'd be like, really?

NIA-MALIKA HENDERSON, CNN SENIOR POLITICAL REPORTER: Yes.

MICHAEL SHEAR, WHITE HOUSE CORRESPONDENT, "THE NEW YORK TIMES": Yes, it will never happen.

BASH: This would never happen. Nobody would do that.

HENDERSON: Yes, too obvious. Yes.

KAROUN DEMIRJIAN: Oh, yes.

BASH: And look at what we're seeing. I mean this is real -- this is real life.

And I think that you're right, and this is the important point here beyond the unbelievable alleged stupidity that we're seeing here, is that we're seeing it -- we saw it last night. We're going to see it up through November in terms of how the voters react to Washington. That has not changed. Donald Trump is a reaction to -- like you said, that kind of allegation. It is the swampiest thing you could possibly do.

KING: It's the argument he made against Hillary Clinton. And the Clinton's don't think the rules apply to them.

BASH: The argument he made -- it's true. And the fact is, Donald Trump might be isolated, might be in a class of his own on allegations that he has to face and maybe he's got a lot more Teflon around him. But others do not. And when it's somebody who is so close to the president, it can help.

SHEAR: Well, what I was going to say, I mean, you're right that from a strict legal standpoint we don't have any indication there's any, you know, connection between Donald Trump and the crime here, but there's at least a couple of reasons why Donald Trump has got to be watching this with some alarm, right? One is just because here is yet another person connected to the Trump orbit who is swampier than anybody. I mean we've had so many of these sort of scandals. The corruption in the cabinet and members of Congress, people that are associated with Donald Trump. And also --

KING: The Manafort/Gates trial underway as we speak.

SHEAR: The Manafort/Gates trial which is going on now.

And then the second thing is, the fellow that folks just watched --

KING: Geoffrey Berman.

SHEAR: Geoffrey Berman at the Southern District of New York's attorney, he's the one conducting the Michael Cohen investigation.

KING: Right.

SHEAR: And so if you're Donald Trump and you're looking at, this is a sort of dry run, a kind of, you know, this is the kind of detail, the kind of methodical, prosecutorial, you know, effort that this guy is going through at -- you know, if not more, in the Cohen case. And that's got -- I mean --

BASH: They get appointed -- appointed by Donald Trump.

SHEAR: Appointed by Donald Trump. Not somebody who's a, you know, a witch hunt. There's no 17 angry Democrats here.

KING: Not yet.

HENDERSON: And we'll -- yes, we'll see what (INAUDIBLE). We'll see what Donald Trump -- what is his reaction, because we've seen his reaction to Paul Manafort, basically saying he's being railroaded.

I think for Democrats, this provides yet another kind of bullet point in their argument that the Republicans are basically -- are swampier than the swamp, that they're not out for the little guy. That they're basically using sort of their access and their privilege to make the lives of their family and their friends and other rich guys easier. And I think you'll see this. I mean it sort of reminds me of 2006 with Mark Foley. Obviously, a

different kind of case, but they were also able to kind of say this was, you know, more broadly the Republican Party, and you don't want them in control anymore.

[12:30:07] KING: To that point, Nancy Pelosi issuing a statement saying this shows a rampant culture of corruption and self-enrichment among Republicans in Washington today.