65 years in prison...ouch!
FBI stock fraud alleged
Agents allegedly passed confidential information on investigations to Internet stock analyst.
May 23, 2002: 1:01 PM EDT
NEW YORK (CNN/Money) - A current and a former FBI agent were among five people charged with securities fraud, as federal authorities accused the agents with feeding confidential criminal investigations about companies to an Internet stock analyst.
Federal prosecutors charge that former special agent Jeffrey Royer was feeding the confidential information to Amr I. "Tony" Elgindy, who ran investment Web sites InsideTruth.com and AnthonyPacific.com. The authorities said Elgindy was a short seller who profited by spreading negative information about companies after taking short positions in the stocks. An investor taking a short position on a stock profits when the value of the stock drops.
Authorities charge that Royer started providing the information to Elgindy in 2000, while he was still an agent, in return for $30,000. After Royer left the FBI in December 2001, he went to work for Elgindy and his Pacific Equity Investigations firm, according to the indictment. The indictment charges that in March and April 2002, Royer got additional information from the confidential FBI files from Lynn Wingate, who is an FBI special agent assigned to its Albuquerque, N.M., office.
The indictment also charges Elgindy and two other of his associates, Derrick Cleveland and Troy Peters, extorted shares of stock from the insiders of publicly traded company in exchange for agreeing to no longer short-sell the company's stocks or spread negative information about them. Cleveland and Peters were also charged in the case.
The defendants "sometimes reported negative information about the targeted companies to the 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 once such action became public," court papers said.
In one case, Royer searched the FBI's confidential National Crime Information Center database and discovered the criminal history of a top executive for a company called Nuclear Solutions, the papers said. The same day, Elgindy began sending e-mails calling the executive "a convicted felon,'' then sold the company's stock short, the papers added.
Click here for a PDF version of the indictment from FindLaw
After they became the focus of a grand jury investigation, Wingate allegedly fed Royer -- by then an employee of Elgindy -- secret information, including descriptions of subpoenaed documents.
The charges "reveal a shocking partnership between an experienced stock manipulator and law enforcement agents, undertaken for their illicit personal financial gain,'' said a statement from Alan Vinegrad, U.S. attorney for the eastern district of New York, where the case was filed.
Kevin Donovan, the assistant director in charge of the FBI in New York, said the case proves the agency will root out criminal conduct wherever it leads.
"That both a current and a former FBI special agent are among the defendants in this investigation is particularly distressing," he said in a statement.
In addition to criminal charges, the Justice Department started civil suits to seize assets of Elgindy and Royer, including a Rolls Royce Bentley, a Jaguar and a Hummer registered to Elgindy or his companies, and his primary home, which the agency said was purchased a year ago for $2.2 million.
The indictments and arraignments took place Wednesday. Royer and Wingate were released Wednesday and ordered to appear in court Tuesday. The other three suspects were being held pending court appearances.
Wingate's attorney, Steve McCue, said of his client, "She's been a solid line FBI agent for three years, and she intends to plead not guilty and fight the case."
Attorneys for the other defendants could not immediately be located for comment.
If convicted of all counts, Royer and Elgindy could receive 65 years in prison. Wingate faces up to 45 years in prison if convicted, and the other defendants, Cleveland and Troy Peters, each could be given 40-year prison terms. |
