Local stock speculator is accused of bribing FBI agents for information on companies
By Dean Calbreath UNION-TRIBUNE STAFF WRITER June 10, 2002
When local stock speculator Amr 'Anthony' Elgindy first dealt with the FBI, it was as an informant –– wearing body wires, using tapped phones and collecting boxloads of evidence in an effort to stay out of jail.
Elgindy's reluctant partnership with the FBI soon blossomed into a profitable relationship. He told the feds about wrongdoing at companies and then made money by betting that the resulting investigations would push the stock prices down.
Now Elgindy faces charges that his relationship with the FBI got too close. He is slated to be extradited to New York this week on charges that he bribed two FBI agents to gain negative information about the companies he was betting against.
His case offers a glimpse into the wobbly companies on the lower rungs of the stock market, the speculators who try to profit from those companies' downfall, and the government watchdogs whose informants often have mixed motives for attacking corporate wrongdoers.
Elgindy, 34, portrays himself as a reformed scam artist, a white knight battling corporate fraud. Others call him a brash, arrogant wheeler-dealer with a sharp tongue, a volatile temper and a penchant for cutting corners to get his way.
During the past several years, he became one of the country's most prominent short-sellers, with a Web site dedicated to purveying damaging information about the companies he was shorting.
But he started out on the other side, as a broker who was trying to pump up worthless stock rather than knock it down.
After a stunted education at the University of Southern California and San Diego State University, Elgindy started peddling stock in 1988 at Blinder, Robinson & Co., which was then being investigated by the Securities and Exchange Commission for foisting shoddy stocks onto unsuspecting investors. When client lawsuits forced Blinder into bankruptcy in 1992, Elgindy, just 24 at the time, migrated to other firms, often drawing complaints from clients who said he misused their money.
In legal proceedings, some clients accused him of making unauthorized purchases, lying about their portfolios or making unnecessary trades to boost his sales commissions. Elgindy's mother told the National Association of Securities Dealers that he had made unauthorized trades in her pension account. She won $30,000 in arbitration in 1992.
Elgindy's high-pressure stock-selling techniques were echoed in his private life. In October 1989, Mary Faith Lumpkin went so far as to seek a court order to force Elgindy to stop harassing her.
'He does not give up. He will call me at home, at work. He will follow me. He will have his friends follow and call me,' Lumpkin complained, adding that she feared he might turn violent.
Not long after the filing, Lumpkin married Elgindy. They now have three children. But some of Elgindy's other relationships have not been resolved so well.
Last month, Elgindy was ordered to pay $155,000 to his former attorney Matthew Tyson for libel and infliction of emotional distress. In a bitter feud, Elgindy slammed Tyson on the Web in racially tinged attacks. He offered Tyson's employer $100,000 to fire him.
'He threatened to hunt me down and to somehow strike me with his shoes, with his foot, and made some threat about hanging me by (an anatomical location),' Tyson said.
San Diego Superior Court Judge William R. Nevitt ruled that Tyson was not blameless in the dispute, because he let his own business interests conflict with Elgindy's, even while serving as his attorney. But Nevitt added that this could not excuse Elgindy for his self-described 'campaign to 'destroy' Tyson and make his life 'a living hell.' '
Elgindy's career path took a hairpin turn in 1995, when he became the target of a federal sweep of local brokers. To avoid trial, Elgindy spent 16 months as an FBI informant. His chief target was his then-employer, Melvin Lloyd Richards, who was making money by peddling worthless stocks through a network of boiler-room brokerages.
Elgindy's testimony was key to the government's successful campaign to put Richards and several associates in jail. Assistant U.S. Attorney Jasmine Saide wrote that 'the government could not have made its cases' without his help.
After the Richards case, Elgindy discovered there was money to be made by ferreting out other Richards-style scam operators –– stock promoters who hype untested technologies or inflate corporate profit figures to push the stock prices of poorly performing companies to sky-high levels.
Elgindy's plan was to find overhyped stocks and short them. To short a stock, an investor borrows shares and immediately sells them, expecting to replace them at a lower price later, betting that the price will go down.
But Elgindy was not content to wait for prices to go down. His idea was to force them down through coordinated attacks with other short-sellers. So he launched a Web site and e-mail list, where he slammed companies in often scatological terms, poking holes in their financial statements and overoptimistic press releases.
Short-sellers paid $600 per month to belong to his e-mail list. An even wider audience followed his attacks in Internet chat rooms.
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'His reports taught investors how to spot stock scams and loser investments,' said Mary Cummins, who dabbles in the stock market in Los Angeles. 'I learned how to do proper due diligence by reading his reports. I learned how to check out management and the company's supposed claims.'
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Elgindy soon developed a reputation as the king of the short-sellers. His short-selling –– together with the money generated by his subscriptions –– helped pay for his $2.2 million mansion in Encinitas and his Humvee, Ferrari, Bentley and Jaguar.
Elgindy employed a variety of questionable techniques to obtain information on the companies he was targeting.
When preparing for an attack on SulphCo, a petroleum desulfurization lab in Reno, Nev., Elgindy visited the company and allegedly gave his name as Tony Carponus, saying he was a potential investor willing to plunk down $3 million if he could review its financial data and tour the plant.
In a scathing Web diatribe after his visit, Elgindy attacked SulphCo's technology, executives and financial projections. He suggested that its equipment was patched together with aluminum foil. He noted that the chief financial officer once headed a company that collapsed as a Ponzi scheme. He said founder Rudy Gunnerman had a record of drawing investors to companies whose products never succeeded on the marketplace.
SulphCo, which sued Elgindy for fraud, refuses to discuss the charges. In a court filing, Gunnerman rebutted some allegations, but left others undisputed. An SEC staff report recently accused the company of violating securities laws, which is often a preliminary step toward an indictment.
The SEC declined to comment on whether it uses Elgindy as a source in its investigations. But SEC indictments often follow his attacks.
'I have provided information on dozens and dozens of companies that were either scams or had suspect activity surrounding them,' Elgindy wrote in a letter last week to The San Diego Union-Tribune from his cell in the federal prison in downtown San Diego.
The question facing federal prosecutors is whether federal agents were providing Elgindy similar information. The indictment handed down last week states that one of Elgindy's subscribers paid $31,425 for criminal records from an FBI agent, which Elgindy then used to slam the companies where the executives worked.
Elgindy denies that. 'I have never paid any FBI agent or any government agent for any information ever,' he wrote.
But Elgindy's penchant for feeding tips to government agencies has long led critics to wonder if he receives tips in return.
'Have any of you believers ever wondered how he gets his inside information?' an online critic who uses the name Walter wrote in 1999. 'Have you called the SEC to learn if he's really a witness, or is he more likely to have a few very fertile plants in that environment? Does he really know what's going to happen, or does he make it happen?'
That's a question a federal jury is probably going to have to answer.
Dean Calbreath: (619) 293-1891; dean.calbreath@uniontrib |
