Charges Against Rep. Chris Collins Highlight Lack of Trading Limits for Congress

Five GOP House members bought shares of an Australian biotechnology company in January 2017 that’s at the center of an insider trading indictment of New York Republican Chris Collins, congressional financial disclosures show.

Collins, who represents a district in western New York, is the only lawmaker accused by prosecutors of wrongdoing — stemming from his role on Innate Immunotherapeutics Ltd.’s board, not his position in the House.

But the allegations against him, along with the other lawmakers’ holdings, highlight how members of Congress face few restrictions on their investments, creating the potential for conflicts of interest, or the appearance of a conflict.

At least one of the lawmakers, John Culberson of Texas, reported selling his holdings a few weeks before the company was privately informed in June 2017 of negative results from a clinical drug trial. When the news was announced, the company’s share price tanked. He said in a statement Wednesday that he didn’t have any inside information when he sold.

The other lawmakers — Mike Conaway of Texas, Doug Lamborn of Colorado, Markwayne Mullin of Oklahoma, and Billy Long of Missouri — either still hold the stock or didn’t sell it in the weeks prior to the public announcement of the negative trial results.

Selling Stock

Collins, one of the biotechnology company’s largest shareholders who served on the board and had access to information that wasn’t public, is accused of tipping off his son about the trial results for a drug to treat a form of multiple sclerosis, according to federal prosecutors in New York. His son Cameron Collins then passed along the information to others. The son and others who received the tip sold more than 1.78 million shares in the days before the trial results were announced, avoiding losses of $768,000, according to the indictment.

Unlike executive branch officials, who must resign from outside positions and divest assets that could pose conflicts of interest, Congress relies on public disclosure as the main mechanism for keeping lawmakers honest. That’s led to a number of scandals involving investment decisions that resulted in charges of self-enrichment and insider trading.

“There are very few restrictions on members of Congress,” said Larry Noble, a former general counsel of the Federal Election Commission, who said members only have to recuse themselves from voting on legislation that specifically benefits a personal investment. “The rationale for it is that almost anything you can do will affect business. It presents real conflicts.”

In 2012, Congress tried to address some of the problems by passing the Stock Act, a measure that made it illegal for members of Congress and federal officials to trade on nonpublic information about pending regulatory or legislative decisions. The law also requires them to publicly disclose stock transactions up to 45 days after making them — in addition to the annual disclosure listing assets and liabilities.

Congress should go further and consider banning lawmakers from serving on boards of public companies and trading individual stocks, said Virginia Canter, chief ethics counsel at Citizens for Responsibility and Ethics in Washington.

“They have an inherent conflict of interest in that their duty as a member of the board is to maximize profit and their duty to the public is to maximize the public good,” Canter said.

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