Witness In Elgindy Trial Fabricated Fake SEC Documents
By Carol S. Remond
Of DOW JONES NEWSWIRES
627 words
10 November 2004
16:58
Dow Jones News Service
English
(c) 2004 Dow Jones & Company, Inc.
NEW YORK (Dow Jones)--Government witness Derrick Cleveland testified Wednesday that he made up three counterfeit documents to look like they were official Securities and Exchange Commission reports about a supposed investigation into Seaview Video Technologies Inc.
Cleveland pleaded guilty to conspiracy to commit securities fraud and has been helping the government make its case that short-seller Anthony Elgindy used confidential government information gleaned from former Federal Bureau of Investigation Special Agent Jeffrey Royer to manipulate the stock of several small companies.
On cross examination Wednesday by defense lawyer Barry Berke, Cleveland admitted that he made up documents to support information he had passed to Elgindy.
Earlier this week, Cleveland testified that he passed confidential government information he had obtained from Royer to Elgindy. Cleveland said Elgindy shared the non-public information with members of his private investing Website. Cleveland also testified that Elgindy used some of the government information to write critical reports about the companies on which he was making negative trading bets.
Elgindy and Royer were charged in May 2002 in a racketeering indictment in the U.S. District Court for the Eastern District of New York. They are charged with securities fraud, market manipulation and extortion. Others charged in the case will be tried separately. Cleveland pleaded guilty to conspiracy to commit securities fraud and is cooperating with the government.
Elgindy's lawyer Berke suggested in court Tuesday that rather than being about a conspiracy to manipulate the shares of small companies, the case is really about Cleveland's desire to impress Elgindy and other members of his investing site with his ability to detect and investigate scams. Berke also suggested that Cleveland wanted the lifestyle of then-successful stock guru Elgindy, as well as sharing his online following.
Under questioning by Berke Wednesday, Cleveland admitted that he fabricated three fake SEC documents which he passed on to Elgindy.
"You created a phony document to make it appear as an official government document, correct?," Berke asked. Cleveland who responded "correct."
Cleveland said he took information from e-mails that Royer forwarded to him and made up the documents. Earlier Wednesday, Cleveland admitted that a large portion of the information contained in the e-mails was public information, including press releases and postings on a public bulletin board called Raging Bull.
Cleveland gave Elgindy the fake SEC documents after forwarding to the San Diego short seller information that suggested the SEC was investigating Seaview and its chief officer, Richard McBride.
The phony documents, which were showed to the jury, contained information about an alleged confidential informant who was supposed to be helping the SEC in its probe into Seaview.
"You were trying to prove to Elgindy that there was a confidential informant, correct?," Berke asked Cleveland, who responded "correct."
Chatlogs from Elgindy's private Website introduced in evidence by the government last week showed that Elgindy and other members of the site had been critical of the information they received from Cleveland about Seaview, especially questioning the fact that an undercover SEC agent was working at the company. SEC investigations are civil and the commission doesn't use undercover agents.
Cleveland denied that he made up the undercover SEC agent and repeated to jurors that he got that information from Royer, even as Berke pointed out to him that an FBI agent would surely know that the SEC didn't use undercover agents.
Berke is scheduled to resume his cross examination of Cleveland Thursday in U.S. District Court for the Eastern District of New York in Brooklyn.
-By Carol S. Remond, Dow Jones Newswires; 201-938-2074; carol.remond@dowjones.com [ 11-10 |
