A small circle of people close to Rep. Chris Collins dumped their shares in Innate Immunotherapeutics just before the stock price crashed in June 2017. One who didn't get out was Collins' top aide Michael J. Hook.
Hook lost money on shares he sold days after the crash. But one year later, Collins did a favor for his chief of staff.
On June 25, Collins loaned Hook somewhere between $250,000 and $500,000, according to a disclosure form that Collins gave to Congress.
The loan was labeled as a mortgage on a rental property that Hook and his wife own in Allegany County. But the loan dwarfed the value of the house, which the Hooks bought for $65,000 in 2013. It's assessed at about $89,000 today.
Collins, a Republican from Clarence whose wealth has been estimated at $66 million, juggles myriad investments and has extended mortgages to others. But Hook agrees: The mortgage from the boss he has known for decades exceeds the value of the collateral at 9223 Beebe Hill Road in Cuba, N.Y.
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"It's basically a personal loan, and it's partially secured by the property," said Hook, whose name popped up when the Office of Congressional Ethics investigated Collins' involvement with Innate.
The congressional inquiry was separate from the FBI probe that in August led to felony insider trading charges against Collins, his son and the son's future father-in-law.
Hook, who has not been charged, said the mortgage was unrelated to fallout from Innate Immunotherapeutics. He wouldn't say how much he lost when Innate crashed or why he needed the loan.
As Collins provided the mortgage, he would have known the FBI was investigating his involvement as a director and shareholder in Innate. An FBI agent knocked on the congressman's door in April, two months earlier.
With that timing, a former prosecutor called the loan from Collins "potentially suspicious."
"The question is, and it's an obvious one, whether the financial arrangement was provided with the understanding that the chief of staff would have Collins' back if ever called as a witness," said David R. Chase of Fort Lauderdale, Fla., who used to prosecute insider trading cases as a senior counsel for the Securities and Exchange Commission and now defends people accused of the crime. "If he had involvement in any facet of the subject matter, or after the fact, it's a fair question for the government to pursue as to why the mortgage was provided, when it was provided, and the terms."
The circumstances drew a similar reaction from Barry N. Covert, a criminal defense attorney in Buffalo.
"The optics are not good," Covert said, indicating the loan could be seen as an attempt by Collins to curry favor with a person who might be relevant to the criminal case. Covert said he would caution one of his own clients against providing such a mortgage, even if the borrower was a friend in dire straits. Still, Covert said he saw nothing illegal in lending the money.
Collins and Hook have worked together as far back as 1998, when Hook was a consultant on Collins' first, and unsuccessful, run for Congress. Hook worked for Collins again during his days as Erie County executive, from 2008 to 2012. And they are together in Washington, where Hook had worked for other Republican politicians. The two golf together and have common acquaintances.
With Collins heavily invested in Innate and serving as a director of the company, Hook became an Innate investor, too.
Collins said so when questioned by an investigator with the Office of Congressional Ethics.
"What about members of your congressional staff," an investigator asked him in June 2017, "do any of them hold stock
at Innate?"
"Yeah, most of them," Collins answered.
"Most of them. Could you name those individuals?"
"Well, certainly Michael Hook."
The investigator soon indicated he already knew Hook held the company's stock. He asked Collins about an email Hook had written to a golfing buddy in Marco Island, Fla., Robert Crine. The email told Crine that the "compassionate trials" Innate was conducting on its experimental drug were going well.
The drug, known as MIS416, was created to help patients with secondary progressive multiple sclerosis. It was the company's only product and the key to its future. Patients in New Zealand had consented to try the drug for their conditions because they had no alternative, and the results were being carefully watched.
The ethics investigator quizzed Collins about the ways in which he was sharing more information than the company itself disseminated about the compassionate trials, with Hook's email to Crine being one example.
The board that governs the Office of Congressional Ethics later concluded "there is a substantial reason to believe" Collins shared "material nonpublic information in the purchase of Innate stock, in violation of House rules, standards of conduct, and federal law."
Asked to comment for this article, the congressman's staff referred The News' questions to the legal team defending him on insider trading charges. Through a spokesman, the lawyers said they would not comment.
The indictment alleging insider trading focuses on a different episode. On June 22, 2017, as Collins attended the congressional picnic on the White House grounds, he received an email from Innate's chief executive telling him and other company directors that MIS416 had failed its clinical trials, which were conducted apart from the compassionate trials. When the news became public, the stock price would dive.
Prosecutors say Collins quickly called his son Cameron, who owned more than 5 million shares. Cameron, according to the indictment, spread the news to his fiancee and her parents, who had bought Innate stock as well. The three of them and others in their circle began selling Innate shares before the company announced the trial's results days later, according to the Securities and Exchange Commission and federal prosecutors in Manhattan.
Prosecutors say Collins, through his congressional staff, later concealed the trading by his son. In response to an inquiry by The Buffalo News, the staff issued a statement in June 2017 saying Cameron had sold all his shares after the public received the bad news about MIS416 and the stock price plummeted. In the indictment, prosecutors say the statement was "designed to mislead."
The News last week asked Hook whether he helped prepare the statement or approved it.
"I cannot comment on a pending federal case," Hook answered.
Hook said the same thing when The News asked him in recent days whether he had testified before the grand jury, and whether he expected to be called to testify in a trial.
And when asked whether he could testify without reservation, considering the loan from his boss, Hook said in an email: "I cannot comment on a pending federal case."
Hook, who is paid around $170,000 a year as chief of staff, said the term of the loan is four years, with interest payments made quarterly.
Calculating Hook's losses on Innate is complicated, because members of Congress and their staffs report their assets and trades in a value range, not to the dollar. On his own financial disclosure form, Hook valued his Innate holdings at $1 million to $5 million at the end of 2016. In January of 2017, when the stock price was peaking, he sold large chunks of his shares, collecting anywhere from $550,000 to $1.3 million. Then he bought more stock, spending somewhere between $136,000 and $640,000 as the weeks passed.
He sold it all on June 29 and June 30, 2017, days after the company publicly announced the news about its experimental drug and the stock price fell 92 percent. Hook collected, at best, $150,000, according to the forms he filled out to comply with the STOCK Act, which bans members of Congress and their staffs from trading on insider knowledge.
The losses in Innate, now known as Amplia Therapeutics, do not appear to have dented Hook's ability to invest. He bought and sold an array of stocks in 96 transactions before the end of 2017. And, according to his disclosures, he has poured more than $200,000 into the market since Collins extended him the mortgage in June.
News Washington Bureau Chief Jerry Zremski contributed to this report.
