"SEC Lawyer Testifies In Elgindy Securities Fraud Case
12-16-04 08:58 PM EST NEW YORK (Dow Jones)
--A lawyer for the Securities and Exchange Commission was so spooked when he got a telephone call from then Federal Bureau of Investigation Jeffrey Royer out of the blue that he called the FBI to check that the agent was in fact working for the government.
Testifying in a Brooklyn courtroom in the criminal case against Royer and short seller Anthony Elgindy, Brian Bressman said that he first heard from Royer in November 2001 and that the agent told him that he had an informant who had information about stock bribes being paid to brokers at brokerage firm Salomon Grey. Bressman is now senior counsel in the enforcement division at the SEC in Washington, D.C.Elgindy and Royer are charged in the U.S. District Court for the Eastern District of New York with securities fraud, market manipulation and extortion.
The government alleges that Elgindy used his Web site to share confidential information he illegally obtained from Royer and that Elgindy and others traded and profited from it.
Bressman told jurors that Royer's call was not normal procedure and that typically he would typically first hear from an Assistant U.S. Attorney before receiving calls from FBI agents working cases possibly related to SEC probes. The SEC senior counsel also said that at the time, he checked Royer out with another SEC lawyer in Texas named Doug Gordimer. Gordimer testified in the case earlier this month.
Bressman said Royer told him in a series of conversations that he had a female informant who could help him develop an ongoing investigation into a company called Freedom Surf. He said one day the agent telephoned him and said that Tony, the informant, would call Bressman. Bressman said someone identifying himself as Al did call with information about Freedom Surf and cash bribes at Salomon Grey.
Bressman and two other SEC employees were called to testify Thursday by Elgindy. Elgindy's defense lawyers are trying to support their contention that Elgindy has on several occasions passed information to law enforcement personnel and that he could have gleaned details of ongoing probes from them during the exchanges. Defense lawyers have also argued that Royer was simply trying to gather information from Elgindy and other short sellers and that in the process he may have shared confidential government information with them in the process.
SEC lawyers said that they exchanged telephone calls or e-mails with Elgindy, but they insisted that they didn't share nonpublic information with him in the process.
Also testifying Thursday was John Sten, a former SEC lawyer now working in private practice. Sten told jurors Elgindy provided him with valuable information during an SEC investigation in 1996 and 1997. But on cross- examination, Sten said that Elgindy testified for the SEC as an accomplice in the scheme and that his testimony involved details of his participation in the illegal short selling scheme that took place at the time.
Earlier Thursday, SEC lawyer Brent Baker testified that the SEC information- gathering process was a one-way street. "There is no give. I'm glad to receive information from any source, but they get no information from me," Baker told defense counsel Barry Berke.
Questioning Baker about the process though which he collects information, Berke asked the SEC lawyer about his contacts with an internet poster named Floyd Schneider. Schneider uses the alias "truthseeker" online.Berke introduced e-mails between Baker, Schneider and Elgindy to support the defense contention that in the process of sharing information with law enforcement personnel, Elgindy was able to glean information from them too.
Federal Judge Raymond Dearie appeared to grow exasperated with the length of Berke's examination of witnesses. During a break without jurors present, Dearie admonished Elgindy's defense lawyer to get to the point. When Berke argued that the prosecution took a long time itself to present the government's case, Judge Dearie answered: "It's not length, it's about relevance. There is no contested issue about Elgindy having long relationships with the SEC and (whomever else) ....My frustration has nothing to do with length, it's the length compared to the relevance!"Testimony in the case is expected to resume Monday.
Royer is expected to testify once Elgindy's lawyers conclude their defense. The trial, which had been predicted to last six weeks and conclude before Christmas, is now expected to continue into early 2005.-
By Carol S. Remond, Dow Jones Newswires, 201 938 2074; carol.remond@ dowjones.com Dow Jones Newswires 12-16-04 2058ET Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved. "
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