I had wondered if the two FBI arrested agents did not have some sort of love affair or something... Though not stated, the possibility is now wide open for speculation...
online.wsj.com
Trader, Former Agent Charged In Alleged Scam Had FBI Data
By JERRY MARKON
Staff Reporter of THE WALL STREET JOURNAL
NEW YORK -- A former FBI agent charged in a stock-manipulation scheme had classified data among his belongings, and the trader he is accused of conspiring with had investigative reports about companies that were illegally taken from the FBI, prosecutors told a federal court judge.
The disclosures, at an arraignment in Brooklyn at which prosecutors argued against freeing former agent Jeffrey A. Royer on bail, were the first tantalizing bits of evidence revealed in the case against the two men along with three others, including a current FBI agent.
Prosecutors told the court that Mr. Royer's FBI business card was discovered paper-clipped to an envelope marked "FBI" in the office of the stock trader and Internet commentator he is accused of conspiring with, Amr "Anthony" Elgindy. Inside the envelope were confidential FBI reports about public companies facing criminal or other probes.
"It's really hard to imagine a stronger case than what we have against Mr. Royer," said lead prosecutor Kenneth Breen, who provided the information in arguing that Mr. Royer should be put in prison at least until he stands trial, because he could flee.
Experts say that, if proved true, the alleged involvement of FBI agents in the scheme -- by providing information from the FBI's Automated Case Support and National Crime Information Center databases -- is almost unprecedented. Mr. Elgindy and other traders allegedly used the information to target stocks by selling them short, and in some cases to extort free or cheap stock from companies.
Short sellers seek to turn a profit by borrowing shares, selling them and then buying back the shares at a lower price if the stock falls, pocketing the difference. Having knowledge of a previously undisclosed government investigation could give a short seller a trading advantage because it could unnerve other investors, causing the stock to fall.
Mr. Breen told Judge Raymond Dearie that Mr. Royer had acknowledged, in an interview with FBI agents after his arrest, to a relationship with Mr. Elgindy. Mr. Royer allegedly said Mr. Elgindy would call him and ask for information on companies, Mr. Royer would retrieve data from FBI databases, give it to Mr. Elgindy and Mr. Elgindy would then trade on it.
But Mr. Royer's lawyer, Lawrence Gerzog, disputed that characterization. "I don't think my client acknowledged any of that contact with Mr. Elgindy," Mr. Gerzog said.
Both Mr. Royer, who went to work for Mr. Elgindy after he left the FBI in December, and the current agent, Lynn Wingate, who worked with him in the FBI's Albuquerque, N.M., office, pleaded not guilty. Mr. Elgindy, who is alleged to have headed the scheme is being held without bail in San Diego, where his office is. His lawyer has said Mr. Elgindy intends to fight the charges.
At Tuesday's hearing, prosecutors told a federal judge that the unauthorized classified reports were found among Mr. Royer's belongings in a search of Ms. Wingate's house in Albuquerque, where prosecutors said Mr. Royer had been staying. "There was no legitimate explanation for why he had these files," said Mr. Breen, who added that the files were related to the investigation of Mr. Elgindy and to "another subject matter" that he wouldn't specify.
Mr. Gerzog said his client would "vigorously contest" the charges that he used confidential government information to manipulate stock prices, and the judge set a bail hearing for Thursday for Mr. Royer, who had been released earlier but must continue to wear an electronic bracelet. Ms. Wingate, who joined the bureau in 1999 and was relieved of duty on May 21, the day before the charges were announced, was released on $100,000 bail. Her lawyer declined to comment.
While FBI officials have said the investigation of Mr. Elgindy began as part of probes into the Sept. 11 terror attacks, prosecutors wouldn't say Tuesday whether the classified materials found in Mr. Royer's belongings related to Sept. 11. The earlier inquiry found nothing connecting Mr. Elgindy to terrorist groups or their financing and became a white-collar crime probe.
Mr. Breen also didn't repeat contentions he made at a detention hearing for Mr. Elgindy on Friday in San Diego that Mr. Elgindy may have had prior knowledge of the Sept. 11 attacks. Those contentions -- based on Mr. Elgindy's dual Egyptian and U.S. citizenship, his travels to the Middle East and the fact that he had tried to liquidate his children's $300,000 fund Sept. 10 -- were assailed by Mr. Elgindy's lawyer as "racial profiling."
Write to Jerry Markon at jerry.markon@wsj.com
Updated May 29, 2002 12:04 a.m. EDT
KJC |
