Prosecutors want ex-Rep. Chris Collins to serve nearly 5 years in prison for insider trading case

Key Points
  • Federal prosecutors on Monday urged a judge to sentence former Rep. Chris Collins, a New York Republican, to nearly five years in prison in an insider trading case.
  • Collins pleaded guilty last year to tipping off his son Cameron about a failed drug test by an Australian pharmaceuticals company whose board Collins sat on.
  • Collins, who was the first member of Congress to endorse Donald Trump's 2016 presidential campaign, is due to be sentenced Friday in U.S. District Court in Manhattan.
Former U.S. Rep. Chris Collins (R-NY) exits federal court on October 1, 2019 in New York City. Collins announced his resignation from Congress on Monday.
Drew Angerer | Getty Images

Federal prosecutors on Monday urged a judge to sentence former Rep. Chris Collins, a New York Republican, later this week to nearly five years in prison in an insider trading case, citing his lies to FBI agents and his apparent efforts to get others to cover up his crime.

"There plainly is a need for the sentence imposed in this case to be substantial enough that it will promote respect for the law, in light of the lack of respect that Collins has shown for it and the importance of making clear that conduct of this kind, by anyone, is not tolerated," prosecutors wrote in a sentencing memo filed in U.S. District Court in Manhattan.

Collins, who represented a Buffalo-area district, pleaded guilty in October to tipping off his son Cameron about a failed drug test by an Australian pharmaceuticals company, Innate Immunotherapeutics, whose board Collins sat on, before the test results were made public.

Collins, 69, had frantically called Cameron Collins on June 22, 2017, from an event he was attending on the White House lawn minutes after getting an email from Innate's CEO informing him and other select company insiders that the drug designed to combat multiple sclerosis had failed its tests. Collins was a major shareholder in Innate.

The tip allowed Cameron Collins, his fiancee, Lauren Zarsky, his fiancee's parents and others who learned about Chris Collins' tip to avoid significant losses in their stock holdings by beginning to sell their shares of Innate Immunotherapeutics the following day.

Innate's stock fell 92% once the company issued a press release about the failed drug test on June 26, 2013. By that time, Cameron Collins had sold more than 1 million shares of the company's stock, avoiding about $571,000 in losses, while his fiancee's father, Stephen Zarsky, avoided losses totaling almost $144,000 after trading on the illicit tip.

"Congressman Collins was unable to avoid losses by selling his own shares because they were not held at a United States broker and could not be traded on the OTC [over-the-counter] markets," prosecutors wrote in their filing.

Both Cameron Collins and Stephen Zarsky pleaded guilty in the case and are due to be sentenced next week.

Chris Collins, who was the first member of Congress to endorse Donald Trump's 2016 presidential campaign, is due to be sentenced Friday for one count of conspiring to commit securities fraud, and for one count of making false statements to the FBI.

He had resigned his seat in Congress a day before pleading guilty, after vowing for more than a year that he would fight the charges, and after winning re-election in 2018 while under criminal indictment.

Federal sentencing guidelines in the case recommend a prison term in the range of 47 to 57 months, according to a report by the U.S. Probation Office.

Prosecutors from the U.S. Attorney's Office for the Southern District of New York want the judge in the case to give Collins a sentence on the high end of that range.

Prosecutors in their court filing Monday said, "The Government believes that a sentence at the top end of the Guidelines range is necessary in order to satisfy the objectives of [the federal criminal code] and in particular to promote respect for the law, to provide just punishment for the offense, and to achieve general deterrence."

The filing notes that in April 2018, FBI agents visited Collins at his home and asked him questions about trading activity in Innate around the time the drug results became public.

"Collins elected to speak with the agents, and to lie to them in order to divert law enforcement from the trail of evidence showing that he and Cameron had committed insider trading," prosecutors wrote.

Collins originally claimed he had not told anyone about the results of the drug tests after receiving them.

"That was a lie," prosecutors wrote.

"Then, he amended his account to say he had told his wife about the trial results, but not Cameron," the filing said. "That was also a lie. Then he invented an additional wrinkle: that Cameron had told him that he (Cameron) intended to sell shares in Innate due to concerns about the trading halt" that occurred after the company said it would be announcing the results, the filing said.

After lying to the FBI, Collins "almost immediately" called Dorothy Zarsky, the mother of Cameron's fiancee, "and left a lengthy voicemail for her," prosecutors wrote.

This Day in History, December 18, 2019

"In committing insider trading and later lying to federal agents to cover it up, and in continuing to actively serve in the House of Representatives during that time period, Collins came to embody the cynical idea that those in power who make the laws are not required to follow them," prosecutors wrote.

"This surely was not lost on him, but it did not cause him to hesitate in making the choice to commit multiple crimes while holding one of the most visible and prestigious jobs in the United States," the filing said. "It is critically important that the sentence imposed on Congressman Collins drive home the message that status does not constitute a basis for leniency."

Prosecutors said that Collins has a net worth of $13.8 million and has nearly $7 million owed to him. His personal assets include "a baseball and coin collection each of which is worth $1 million."

Prosecutors noted those assets before arguing that Collins "could have ameliorated any concern that Cameron would have lost money in Innate simply by gifting Cameron money."

"His choice to commit fraud, as if two options were morally equivalent, bespeaks a total disregard for the rules that are intended to govern everyone's actions," the filing said. "His subsequent lies to the FBI indicate the same disregard."

A lawyer for Collins did not immediately respond to a request for comment by CNBC.

Collins' lawyers, in their own sentencing memorandum last week, urged the judge to give the fallen congressman a sentence of mere probation.

As part of their recommendation, Collins' lawyers submitted a slew of letters lauding Collins, including ones from more than a dozen present and past Republican members of Congress.

Former House Speaker John Boehner, in one of those letters, called Collins "a good man."

Collins "is a family man who has a passion for his country, his wife, his children and grandchildren," Boehner wrote. "As human beings, we make mistakes and errors of judgment, and we have to accept the consequences that come with our mistakes and our errors of judgment. Chris, I believe, would be the first to agree with this," wrote the former speaker.

"I know this experience has been mortifying for him," Boehner wrote. "I continue to believe he is a good man who loves his family and his country."

Cameron Collins, who also pleaded guilty in the case, is due to be sentenced Jan. 23. Stephen Zarsky, the father of Cameron's fiancee, will be sentenced the following day. Stephen Zarsky had avoided nearly $144,000 in losses after being tipped by Cameron.

Prosecutors in their filing Monday said Cameron Collins has a net worth of more than $21 million.

Neither Lauren Zarsky nor her mother, Dorothy Zarsky, were prosecuted in the case. The two women avoided losses totaling more than $42,000 in their own trading on the tip.

— CNBC's Kevin Breuninger contributed to this report.