Rep. Chris Collins (R-N.Y.) was standing on the White House lawn last June when, prosecutors say, he received word that a drug in which he was heavily invested had failed a clinical trial, then tipped off his son. The flurry of activity that followed — as the news spread to family and friends who dumped millions of shares of the stock — led to Collins's arrest Wednesday in what would otherwise appear to be a garden-variety insider trading case.
But Collins’s status as a member of Congress (and outspoken champion of President Trump) sets it apart and raises new questions about the propriety of lawmakers both serving on public boards and trading stock. Collins was tipped to the drug trial's failure because he served on the board of the company — a small Australian biotech firm called Innate Immunotherapeutics — a position that ethics experts called unusual and potentially problematic for a lawmaker, if within bounds of congressional ethics rules. (Read the indictment here.)
Collins maintains he is innocent. In a Wednesday evening news conference, he pledged to face down the charges while campaigning to keep the western New York seat he’s held for three terms. The legal fight ahead complicates what would likely have been an easy march to reelection. “Throughout my tenure in Congress, I have followed all rules and ethical guidelines,” Collins said.
Here, via CBS News producer Sara Cook, is a shot of Collins on his phone during a White House picnic at the time he is alleged to have been tipping off his son to news about his investment:
NEW: @CBSNews has footage of @RepChrisCollins speaking on his phone at last summer's White House Congressional Picnic. Taken at approximately 7:17 pm; according to the indictment, Collins called his son Cameron at 7:16 pm and they spoke for 6:08 min. pic.twitter.com/5r5rYuq6os— Sara Cook (@saraecook) August 8, 2018
Another shot, via CNN's Kristin Keppler:
Rep. Chris Collins (bottom left of screen) at the WH Congressional picnic. Time: 7:30pm pic.twitter.com/s1OTRwBwa4— Kristin Wilson Keppler (@TheOtherKeppler) August 8, 2018
Collins’s position on the board was technically kosher because he didn’t draw a fee. Nevertheless, Stan Brand, a former general counsel to the U.S. House, said he would advise against it. “Obviously, there are entanglements in Congress between your duties as a member and your fiduciary obligation to the corporation,” he said.
Collins was already facing heat for mixing the two. A House ethics watchdog last October said it found “substantial reason to believe” the lawmaker broke both federal law and congressional rules by advocating for the company in his capacity as a public official.
As my colleague Mike DeBonis reported at the time, the Office of Congressional Ethics zeroed in on a Nov. 18, 2013, visit that Collins and a staffer made to the National Institutes of Health, where he is “alleged to have asked with help in designing Innate Immuno's drug trial. The meeting came after Collins, in a July 2013 hearing of the House Committee on Science, Space, & Technology, mentioned Innate Immuno's drug to a top NIH official without disclosing his stake in the company. The official then invited Collins for a visit.”
House Speaker Paul Ryan (R-Wis.) announced Wednesday Collins would be removed from the House Energy and Commerce Committee while a House Ethics Committee investigation proceeds.
Rick Boucher, a former 14-term congressman now practicing law at Sidley Austin, tells me he doesn’t recall lawmakers serving on public boards. “You can certainly see the potential for conflicts of interest,” he said. “My sense is it’s probably not a good idea to allow it.”
Collins didn’t sell his own stock after receiving the news of the drug trial’s failure, absorbing a $17 million loss he highlighted Wednesday. He also promoted the company to colleagues in the House, five of whom bought its stock. Geoffrey Berman, the U.S. attorney for the Southern District of New York, would not say whether those members were under investigation, saying it was “not an aspect of this indictment,” per Politico.
But the story underscores how the phenomenon of lawmakers playing the stock market has gained significant steam in recent years.
About a fifth of federal lawmakers owned stock in 2001, which doubled by 2013, when they had collectively invested up to $1 billion directly in hundreds of stocks, according to CNN Money. Harvard Business Review examined the matter last year and found over half of Congress owns stock, “many with holdings in excess of $100,000 in stocks alone, not to mention mutual funds and other forms of investments.”
A Washington Post analysis in 2012 of 45,000 individual stock transactions by lawmakers found an eighth of them intersected with legislation before Congress.
That year, Congress passed the Stock Act to clarify that lawmakers can’t trade on nonpublic information.
Last year, the late-Rep. Louise Slaughter (D-N.Y.), a sponsor of the original law, introduced an update prompted in part by Collins’s participation in an initial public offering in a foreign market that he didn’t disclose on financial forms.
Per the Washington Post’s Kimberly Kindy, the bill “expressly prohibits members from taking part in foreign IPOs, purchasing stock at discounted prices, selling stock at higher than market value or participating in private-placement stock offerings.” It’s drawn a single cosponsor and hasn’t budged.
Virginia Canter, chief ethics counsel for watchdog Citizens for Responsibility and Ethics in Washington, said Collins’s promotion of the stock raises the appearance “of using public office for private gain,” and points to the broader question: “People have to give some serious thought to whether Members of Congress should be trading,” she said. “If it were up to me, I’d recommend they not do that.”
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— China punches right back. The Washington Post's David J. Lynch, Damian Paletta and Amanda Erickson: “Nearly five months after [Trump] first confronted China with tariffs over its trade practices, the two countries are further than ever from resolving their differences and appear to be digging in for what is likely to be a long and bruising conflict. China said Wednesday that it would impose tariffs on an additional $16 billion in U.S. autos and energy products, retaliating for the Trump administration’s latest import levies on an equivalent value of Chinese goods. Beijing signaled this week that it might target prominent American companies such as Apple if the trade dispute escalates. The iPhone maker relies upon China for one-fifth of its $229 billion in annual revenue, 'leaving it exposed if Chinese people make it a target of anger and nationalist sentiment,' warned a commentary in the state-owned China Daily.”
Trump won't discuss his strategy. CNBC's Kayla Tausche and Tucker Higgins: “Trump declined to discuss his strategy for dealing with China at a private business dinner with CEOs on Tuesday night, as U.S.-China trade tensions escalate. The president said 'he wouldn't go there' after he was asked about how he would manage U.S.-China relations going forward as the two economic giants spar on trade policy, according to an executive who attended the dinner at Trump's golf club in Bedminster, New Jersey.”
But he's tired of failure. Bloomberg's Devin Leonhard and Saleha Mohsin, in a lengthy new profile of Treasury Secretary Steven Mnuchin, report that he "may still persuade Trump to abandon his trade war. In late July, Trump and Jean-Claude Juncker, president of the European Commission, agreed to hold off on further tariffs while they tried to reach a new trade agreement. Bloomberg also reported at the time that Mnuchin and Liu were flirting with the idea of resuming talks. Soon after, though, the U.S. and China were trading threats of escalated tariffs. For the time being, a White House official says, Trump remains fond of Mnuchin, but he’s tired of the failures in the China negotiations."
— NAFTA talks focus on cars. Bloomberg News's Eric Martin: “U.S. and Mexican negotiators are working to reach a Nafta cars deal this week that would allow Canada to rejoin talks and move toward resolving the toughest issues that affect all three nations, according to three people familiar with the discussions. Getting an agreement on automobiles would let the U.S. turn its attention to demands that only affect Canada, such as increasing American access to the dairy market north of the border. It would also leave the thorniest issues that affect all three nations, like a so-called sunset clause and dispute-settlement panels, to be worked out with all countries at the table, according to the people, who asked not to be named discussing private talks. ... The U.S. has been looking for ways to discourage factories and jobs from moving to Mexico because its labor is cheaper. Canada’s automotive wages are closer to those of the U.S., making that issue one where its interests align with the U.S.”
— China, Germany push back on Iranian sanctions. Reuters's Ben Blanchard and Michelle Martin: “China and Germany defended their business ties with Iran on Wednesday in the face of [Trump’s] warning that any companies trading with the Islamic Republic would be barred from the United States. ... 'China has consistently opposed unilateral sanctions and long-armed jurisdiction,' the Chinese foreign ministry said. 'China’s commercial cooperation with Iran is open and transparent, reasonable, fair and lawful, not violating any United Nations Security Council resolutions,' it added in a faxed statement to Reuters. 'China’s lawful rights should be protected.' The German government said U.S. sanctions against Iran that have an extra-territorial effect violate international law, and Germany expects Washington to consider European interests when coming up with such sanctions.”
— Trump administration to sanction Russia. The Post's Karen DeYoung and Carol Morello: “The Trump administration said Wednesday it would impose extensive new sanctions against Russia, banning a wide range of exports and other measures, as punishment for its use of a nerve agent in an attempt in March to assassinate British citizen and ex-Russian intelligence officer Sergei Skripal and his daughter. The sanctions again highlighted the gap between [Trump’s] conciliatory language toward Russia and the tough position taken by many in Congress and within the administration itself. Trump, who has resisted congressional insistence on additional sanctions on Russia for election interference and other activities, appeared to have had little choice in the matter, however. Under a 1991 law, he was required to act once the administration determined Russian responsibility for a chemical or biological weapons attack.”
Russia responds. Reuters: “Russia’s embassy in the United States on Thursday called new U.S. sanctions draconian and said the reason for the new restrictions — allegations it poisoned a former spy and his daughter in Britain — were far-fetched. ... 'On August 8, 2018 our Deputy Chief of Mission was informed in the State Department of new 'draconian' sanctions against Russia for far-fetched accusations of using the “Novichok” nerve agent against a UK citizen,' the embassy said in a statement. 'We grew accustomed to not hearing any facts or evidence.'”
- “Manafort’s defense team takes parting shot at Rick Gates as star witness ends testimony.” The Post's Rachel Weiner, Matt Zapotosky, Lynh Bui and Devlin Barrett.
- “Devin Nunes, in secretly recorded tape, tells donors GOP majority is necessary to protect Trump: ‘We’re the only ones.’” The Post's Isaac Stanley-Becker.
- “Butina prosecutors seek court order to protect secret evidence.” Bloomberg News's Erik Larson.
- “Trump lawyers respond to Robert Mueller’s terms for interview with the president.” The Wall Street Journal's Rebecca Ballhaus.
— Trump stands to benefit from tax law. NYT's Jim Tankersley: "A new 20 percent tax break included in last year’s $1.5 trillion tax overhaul could wind up benefiting [Trump’s] real estate empire given how the Treasury Department plans to implement the provision, several tax experts said. On Wednesday, the Treasury Department issued a sprawling regulation outlining the types of companies and professionals eligible to qualify as 'pass-through' entities and get the 20 percent tax deduction. The widely anticipated rule has huge implications for law firms, real estate trusts, family farms and other companies that are structured so their profits are taxed as individual income for their owners...
"The regulation could also be a win for the president himself, because of how the regulation defines businesses that rely primarily on the “reputation or skill” of their owners to earn money. Those businesses are excluded from taking the deduction, but the regulation defines them narrowly, in a way that appears to allow the companies of the Trump Organization to qualify for the tax break at least in part."
— Questions abound on Tesla's plans. The Post's Drew Harwell: “As Tesla’s board of directors rallied Wednesday behind chief Elon Musk’s extraordinary push to take the all-electric automaker private, a growing contingent of investors, analysts and former regulators voiced doubts that the deal would ever take off. Tesla’s board, a nine-member group that includes Musk’s younger brother, Kimbal, issued a belated statement Wednesday morning saying Musk had 'opened a discussion' last week with the board about the benefits of taking Tesla private. The board, it said, had met 'several times' over the past week and was actively working to 'evaluate' the proposal. But the board offered no further details of the proposal or its funding, sparking new questions about the feasibility of the surprise gambit Musk revealed in midday tweets Tuesday. 'This is out there, even for Tesla,' analysts with Barclays wrote Wednesday.”
SEC probes. WSJ's Dave Michaels and Michael Rapoport write that the SEC wants to know whether Musk was being truthful when he tweeted that he had secured funding for the move. “The SEC’s inquiries, which originated from the agency’s San Francisco office, suggest Tesla could come under an enforcement investigation if regulators suspect that Mr. Musk’s statement was misleading or false.”
Market top? Reuters: "A leveraged buyout of electric carmaker Tesla could be an ominous sign of market exuberance, but investors may need more justification to run for the exits. [Musk's move]... had some investors wondering whether getting such a huge deal completed would signal that Wall Street has become overheated after nearly a decade of gains following the 2008 financial crisis. 'A mega-LBO of a company notorious for its cash burn rate would be the clear sign that this is the ultimate market top,' Mike O’Rourke, Chief Market Strategist at JonesTrading, wrote in a client note. 'This is the type of behavior often witnessed at market extremes.'”
— NYC caps Uber. The Post's Faiz Siddiqui: “The New York City Council on Wednesday passed a cap on Uber, Lyft and other for-hire vehicles in the city along with a minimum wage for drivers, becoming the first city in the nation to impose such sweeping measures to offset the growth of the ride-hailing industry. The legislation imposes a one-year ceiling on non-wheelchair-accessible for-hire vehicles while the city undertakes a study on the impacts of ride-hailing. Uber and Lyft had objected to the proposal, arguing it would increase wait times and make rides harder to find in neighborhoods across the city. In a statement, New York Mayor Bill De Blasio (D) commended the Council for its vote, arguing the cap would 'stop the influx of cars contributing to the congestion grinding our streets to a halt.' De Blasio called the growth of ride-hailing a 'crisis' and said the services are clogging streets and 'driving New Yorkers into poverty.' He said he intends to sign the bill.”
— Walmart's India deal accepted. Reuters's Sankalp Phartiyal: “India’s anti-trust regulator has approved U.S. retail giant Walmart Inc’s $16 billion acquisition of online marketplace Flipkart, beefing up the competition to Amazon.com Inc in the fast growing e-commerce market. Bentonville, Arkansas-based Walmart announced in May it was acquiring about 77 percent of Flipkart for roughly $16 billion in the biggest deal for India’s e-commerce sector, which Morgan Stanley estimates will grow close to an annual $200 billion in a decade. The Competition Commission of India (CCI) has approved the proposed acquisition of Flipkart by Walmart, the agency said in a post on Twitter on Wednesday.” (Amazon.com founder and chief executive Jeffrey P. Bezos is the owner of The Post.)
— NYT reports profit. The New York Times's Jaclyn Peiser: “The New York Times continued its digital growth in the second quarter of 2018, adding 109,000 digital-only subscribers. With that rise came an increase in revenue that counteracted a decline in print advertising. The company said on Wednesday that revenue from digital subscriptions rose to $99 million in the second quarter, a jump of nearly 20 percent compared with the same period a year ago. Over all for the second quarter, total revenue increased 2 percent, to $415 million, and the company reported a profit of almost $24 million. The Times now has 2.9 million digital-only subscribers, out of 3.8 million total.”
— Barkin endorses rate hikes. Bloomberg News's Craig Torres: “The U.S. central bank should follow through on gradually raising interest rates to more normal levels, though 'how high rates will ultimately need to rise depends on economic growth,' said Federal Reserve Bank of Richmond President Thomas Barkin. 'It is difficult to argue that lower than normal rates are appropriate when unemployment is low and inflation is effectively at the Fed’s target,' he said Wednesday in Roanoke, Virginia, as he described the case for further gradual rate hikes. 'In addition, we don’t want to risk the credibility of our commitment to low and stable inflation.'... [Barkin's] public comments on monetary policy, which place him in the center of the consensus on the FOMC, were his most substantive on the topic since he became a central banker.”
— The deficit is soaring. The Hill's Niv Ellis: "The federal deficit jumped 20 percent in the first 10 months of the 2018 fiscal year, the Congressional Budget Office reported Wednesday. Spending outpaced revenue between the beginning of the fiscal year, on Oct. 1, and July by $682 billion, $116 billion more than over the same period in the last fiscal year. The rising deficit is largely the result of the tax cuts [Trump] signed into law at the end of last year, as well as a bipartisan agreement to boost spending, according to CBO. Tax revenues from individuals rose, even as revenues from corporate taxes dropped."
— Barney Frank has some regrets. The former congressman tells New York's Nick Tabor that the bank bailout's biggest failure was in stemming foreclosures: "We did not do enough to help some of the innocent victims of all this. Here’s what happened: Some of the people who faced foreclosure, it was their fault. They overreached. But other people were misled, other people had reasonable expectations and then the market for their property dropped, and then there were other victims." Frank says he convinced then-Treasury Secretary Hank Paulson to tap some of the second tranche of TARP for homeowners but insisted on getting approval from then-President-elect Obama, who declined: "Obama said what most presidents-elect would have said in that situation: 'No, he has the legal authority to do it, and I’m not gonna take responsibility over something I have no control over. If he wants to do it, he can do it. We only have one president at a time.' It made me crazy."
— WH slashes markets watchdog. Reuters's Pete Schroeder: "The Trump administration moved on Wednesday to shrink a government agency tasked with identifying looming financial risks, notifying around 40 staff members they would be laid off... The employees at the Office of Financial Research were formally told on Wednesday they will lose their jobs as part of a broader reorganization of the agency that was created in the wake of the 2007-2009 global financial crisis... The overhaul forms part of a broader push by the Trump administration to reduce government bureaucracy by slashing government jobs and cutting regulations."
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