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Judge Sets Bail Hearing For Short-Seller Elgindy
By CAROL S. REMOND
DOW JONES NEWSWIRES
NEW YORK -- Short-seller Anthony Elgindy pleaded not guilty to charges of securities fraud and racketeering Friday but will remain in jail while a judge waits to hear formal arguments from his lawyers for bail.
Mr. Elgindy has been in jail since May 22 after he was accused by federal prosecutors of running a short-selling and extortion scam that allegedly involved a current and former FBI agent.
A hearing is scheduled for Thursday, at which time U.S. District Judge Raymond Dearie will consider whether to release Mr. Elgindy on bail.
At a preliminary hearing Friday, prosecutor Ken Breen argued that Mr. Elgindy should remain behind bars because his dual U.S./Egyptian citizenship and large amounts of cash abroad make him a flight risk. Mr. Elgindy's lawyer, Sean O'Shea,, argued that although Mr. Elgindy was born abroad, he and most of his family are firmly entrenched in the U.S.
The other defendants in the case are out on bail. They include Jeffrey Royer, a former federal Bureau of Investigation agent who left the agency to work for Mr. Elgindy; Lynn Wingate, an FBI agent who was put on leave after her arrest; and Mr. Elgindy's associates Derrick Cleveland and Troy Peter.
The government alleges that Mr. Royer and Ms Wingate provided confidential FBI information to Mr. Elgindy and his associates about criminal histories or investigations of companies. The government alleges that the information was used by Mr. Elgindy and his associates to put pressure on stocks that they were short-selling. And on some occasions, allegedly to extort free or cheap shares from the companies they targeted.
Mr. Breen described Mr. Elgindy as the "ring leader" who faces significant charges and said that upon his return from a trip to Lebanon last year, Mr. Elgindy was preparing to flee after being alerted about the government's investigation by Mr. Royer.
Mr. Breen said Mr. Elgindy transferred $625,000 to Lebanon upon his return from the country. In addition to purchasing a beachfront property worth $325,000, the prosecutor said Mr. Elgindy opened accounts in the country and started a company there.
Also, Mr. Breen said that in addition to transferring money, Mr. Elgindy had shifted the ownership of most of his accounts into a company based in Lebanon but with a Canadian address.
Mr. Breen also told Judge Dearie that Mr. Elgindy had tried to set up a direct deposit of the fees paid by subscribers to one of his Web pages in the amount of $25,000 that would be wired each month to him in Lebanon. Mr. Elgindy used two Web pages to publicize his short-selling efforts.
Mr. O'Shea said Mr. Elgindy had wanted to set up the monthly transfer for a planned vacation in Lebanon and that he abandoned the idea after he was denied permission to travel there. Mr. Elgindy is on parole for a mail fraud conviction two years ago and needs permission before leaving the U.S.
"What is significant here is that the money was not sent because the trip did not take place," Mr. O'Shea said.
Write to Carol S. Remond at carol.remond@wsj.com
Updated June 21, 2002 7:26 p.m. EDT
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