Testimony Of First Witness In Elgindy Case Wraps Up
By CAROL S. REMOND
November 17, 2004 2:40 p.m.
Of DOW JONES NEWSWIRES
NEW YORK -- Defense lawyers Wednesday continued taking aim at government witness Derrick Cleveland's claim that he and others participated in a corrupt scheme to use confidential federal information to manipulate the price of the shares of publicly traded companies.
In his 10 days on the witness stand, Cleveland has testified that he got information from former Federal Bureau of Investigation special agent Jeffery Royer and that he shared that information with Anthony Elgindy and other short sellers who used the tips to profit from trading stock.
Elgindy's and Royer's lawyers meanwhile have claimed that the FBI agent was simply trying to gather information from Cleveland and other traders in an effort to ferret out stock fraud. The defense lawyers have also argued in their cross examinations of Cleveland that the government witness overstated the nature of his relationship with Royer and Elgindy. They suggested that Cleveland is trying to make their clients take the blame for his actions.
Cleveland has pleaded guilty to conspiracy to commit securities fraud. Elgindy and Royer are accused of committing securities fraud, market manipulation and extortion in the Eastern District for the District Court of New York.
Questioning Cleveland Wednesday, Elgindy's lawyer Barry Berke used chat logs to demonstrate that on several occasions, Cleveland began short selling the shares of companies after Elgindy made "short calls" about them on his private investing Web site, and not, as Cleveland claimed, after receiving confidential information from Royer.
Berke also grilled Cleveland on his claim that Elgindy used non-private information provided by Royer to make trading decisions. Using chatlogs from Elgindy's Web site, Berke highlighted that Elgindy would often contact agents at the Securities and Exchange Commission and the FBI to report stock fraud and that on occasions, Elgindy gleaned information from these calls.
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Insert Peanut gallery Observations
IMHO: This is legal malpractice, the attorney just made the case of the prosecution. That by claiming to be helping the FBI that in fact Mr. Elgindy was able to use his ability to unearth non-public information from the FBI and SEC. This is the same way Hackers are able to get codes from employees, in order to break into the systems. Likely be the same contacts that Royer gave Mr. Elgindy.
The problem is Mr. Elgindy should be either helping the FBI, or helping his trading. His own lawyer is showing to the jury that Mr. Elgindy was able to get information from people on the inside of the SEC or FBI, which Mr. Elgindy then was able to use to trade upon. The obvious question is for which benefit is Mr. Elgindy calling up the FBI to share this information he has. Is it to share, like a boy scout? Or is the real motive to prod and poke FBI and SEC contacts for information internal in their non public investigations?
That is one crazy defense for the charges in this case. Anyone please explain what Mr. Elgindy's attorney is trying to do?
If anyone on the jury has a high school diploma they will see what I just said immediately. If you are so close to the facts it may seem like a good thing to say, but I dare say at least some on the jury after hearing Mr. Elgindy's lawyer- said "ah-ha there it is...right there"
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In the case of a company called Sulphco Inc. (SLPH), Berke used chatlogs to show that a former employee of the company named Todd Orme began helping Elgindy debunk the company's claim that it could remove sulfur from diesel fuel.
"Orme in July (2001) was talking to the FBI on behalf of Sulphco, blaming Elgindy. You recall that?" Berke asked Cleveland, who answered yes. The witness agreed with Berke that Orme later recanted his allegation against Elgindy and then began helping the short seller.
Cleveland had testified for the government that he got information from FBI agent Royer about Sulphco that he passed on to Elgindy. Cleveland also testified that Royer intervened to make a budding FBI investigation into Elgindy's actions relating to Sulphco go away.
Following the conclusion of the morning session, federal judge Raymond Dearie reminded Berke that he had to complete his cross examination of Cleveland shortly after the lunch recess. Prosecutor Ken Breen is then expected to "redirect" the witness.
-By Carol S. Remond, Dow Jones Newswires; carol.remond@dowjones.com; 201-938-2074 |
