Re: 5/23/02 - San Diego Union Tribune: Encinitas stock adviser faces charges; Short-seller, associates accused of paying FBI agents for inside info
Encinitas stock adviser faces charges
Short-seller, associates accused of paying FBI agents for inside info
By Don Bauder
UNION-TRIBUNE STAFF WRITER
May 23, 2002
Encinitas' Amr I. (Anthony) Elgindy – an internationally known short-seller – appeared in U.S. District Court in San Diego yesterday on multiple charges of stock manipulation, extortion, misuse of confidential law enforcement information and obstruction of a grand jury investigation of his alleged scheme.
Short-sellers borrow stock, sell it and hope to replace it at a lower price, thus raking in money on a decline.
But the U.S. Attorney's Office for the Eastern District of New York charged that Elgindy and his associates used their Internet clout to influence stocks' collapse, paid FBI employees to feed them inside negative information on companies, and extorted money from executives who feared the Elgindy shorting machine would destroy their companies.
Elgindy and Troy M. Peters, an associate at his companies – Pacific Equity Investigations, Insidetruth.com and AnthonyPacific.com – came before Magistrate Judge John A. Houston yesterday afternoon.
Peters' bail was set at $200,000. Elgindy's bail will be set this morning. Both are in jail here. They will have an identification hearing June 6, then go on to Brooklyn for arraignment.
Also charged in different courts were Jeffrey A. Royer and Lynn Wingate, FBI agents who allegedly supplied secret information to Elgindy and his associates, and Derrick Cleveland, an Elgindy employee.
Late last year, Royer resigned from the FBI and began working directly for Elgindy, according to the government.
Two years ago, Elgindy spent 105 days in prison on a mail-fraud conviction in Texas.
Initially in San Diego, he worked for a brokerage house that was connected with the stock manipulator Melvin Lloyd Richards, who has been given prison time in Los Angeles, San Diego and New York.
Elgindy then claimed he went straight, and wanted to help investors who have been fleeced. He set up his Internet operation, and short-sellers paid him money for recommendations.
He succeeded. He lives in a house worth more than $2.2 million, according to the indictment. The government wants to seize a Rolls-Royce Bentley, Jaguar and Hummer registered in his or his companies' names.
His Encinitas home was raided by the FBI Tuesday, and documents and assets were seized.
The indictment charges that Elgindy and his associates would short a stock, then put out a barrage of negative information about it on Web sites, sometimes anonymously.
Elgindy, Peters and others "sometimes reported negative information about the targeted companies to the U.S. Securities and Exchange Commission and the FBI in order to initiate or hasten regulatory and law enforcement action, which they knew would cause the stock prices to fall sharply," said the indictment.
There have been curious cases that were not cited in the indictment. On Jan. 17 of this year, Elgindy's Web site blasted San Diego's New Energy. The next day, the SEC suspended trading in the stock and in March filed a fraud suit against the company.
No comment
On Oct. 23 of last year, Elgindy sent out a negative report on North Carolina's Vital Living Products, then touting an anthrax antidote. By the end of November, the FBI had raided the company and the SEC was probing it. Early this year, it settled a case with the Federal Trade Commission.
Yesterday, the SEC refused to comment.
Tor Ewald, chief executive of New Energy, reached a consent decree with the SEC, promising not to break securities laws but not admitting his complicity in any stock-inflating scheme. Yesterday, he refused to comment on Elgindy.
When Elgindy's Texas case was ongoing, the U.S. Attorney's Office in San Diego wrote a letter on his behalf, saying he had been instrumental in the case against Richards. But the office later refused to comment on the letter.
Yesterday's indictment charges that Cleveland wired more than $30,000 to Royer while he was an FBI agent. Royer did not report the payment to the FBI, according to the government.
After getting secret reports from the FBI, Elgindy and his associates assessed whether companies were susceptible to blackmail, according to the complaint. "Sometimes extortionate demands were coupled with threats to report a company's activities to the SEC or FBI," said the complaint.
Covering shorts
Once the extortion scheme succeeded, Elgindy and his associates would tell subscribers to cover their shorts, or buy stock to close out their short positions, according to the complaint.
In court yesterday, New York prosecutors said one of the companies that the group tried to extort funds from was Idaho-based Nuclear Solutions. The Elgindy group put out word that a top executive of the company was a felon, shorted the stock, and passed the word to the company through Peters. Then in late January, the group quit following the company, presumably a recommendation for investors to cover their short positions. The company's stock moved higher.
Nuclear Solutions did not return calls yesterday.
Elgindy has had personal and psychological problems. The U.S. Attorney's Office in Texas charged him with fraud over a disability insurance policy. It charged that he overstated his income by about 100 percent in the early 1990s in trying to boost his collection from the policy.
"I was diagnosed with severe depression," he said at the time.
He said the Texas authorities were looking into him for immigration fraud and drug dealing, but the government never affirmed that.
In his early days, he worked for disreputable brokerages, including Richards' now-defunct Armstrong McKinley and Denver's Blinder Robinson, which came to be known as "Blind 'em and Rob 'em."
"I ran with some bad people who took advantage of me when I was a young kid," said Elgindy at the time of his Texas indictment. "I have done some crazy things in my life," including living an excessively lavish lifestyle, he said.
--------------------------------------------------------------------------------
Union-Tribune library researcher Erin Hobbs and staff writer Michael Kinsman assisted with this story.
Don Bauder: (619) 293-1523; don.bauder@uniontrib.com
© Copyright 2002 Union-Tribune Publishing Co.
signonsandiego.com |
