After Chris Collins Indictment, Expect Reform of House Rules
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The insider trading scandal surrounding Rep. Chris Collins prompts an examination of House ethics rules.
Collins Was Already Under House Scrutiny
The legal troubles of Chris Collins, the Representative from New York, have brought to the forefront a larger issue. The House of Representatives’ ethics rules, in contrast to those for the Senate, permit Representatives to accept corporate board positions.
A legislator who holds a corporate role may prioritize certain corporate interests. One who straddles the corporate and lawmaking world can easily create at least an appearance of impropriety.
Collins may be a textbook case. As a sitting member of the committee that has jurisdiction over pharmaceutical companies (House Energy and Commerce Committee), Collins had raised eyebrows at the House Ethics Committee last year for advocating for Innate Immunotherapeutics Ltd., on whose board Collins also sat.
Feds Prosecute Collins for Insider Trading
Collins was also Innate’s biggest investor. Last year, one of Innate’s new multiple sclerosis drugs failed in clinical tests. Collins, as a board member, found out early. Then, in a move that prosecutors point to as unlawful insider trading, Collins tipped off family immediately, before the rest of the world learned of the issue. The Collins family was therefore enabled to avert personal losses of more than a half million by dumping the stock.
Employees or directors of publicly held companies have fiduciary duties to corporations, including confidentiality of secret information. Corporate insiders who trade stocks based on confidential information, or help others do the same, have breached their fiduciary duty.
House of Representatives Prepares for a Rule Change
House Speaker Paul Ryan took Collins off the committee once the errant New York representative had been arrested to face federal charges. And now the House of Representatives has more reason than ever to end the troubling prerogative for its members to serve on corporate boards.
In a bipartisan initiative spearheaded by Tom Reed (R-NY) and Kathleen Rice (D-NY), the House may soon match a provision barring Senators from holding any officer or board positions for publicly regulated banks or businesses.
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