Re: 11/4-12/2/04 - [Elgindy] Carol Remond Reports from the Dow Jones Newswires
Witness: FBI Agent Helped Direct Probe Away From Elgindy
11-04-04 02:39 PM EST
NEW YORK (Dow Jones)--Special Agent Jeffrey Royer used his position at the Federal Bureau of Investigation to redirect a budding investigation of short seller Anthony Elgindy's dealings with Sulphco Inc. (SLPH) into an investigation of the company, a government witness said Thursday in a Brooklyn, N.Y., courtroom.
Testifying in the criminal case against Elgindy and former FBI agent Royer, Derrick Cleveland said that after Elgindy became aware that the FBI was looking into his actions, Elgindy asked Cleveland to contact Royer to figure out what was going on. Elgindy and others in the case are charged with securities fraud, market manipulation and extortion.
Federal prosecutors claim that Elgindy and others used confidential information obtained from Royer to trade the stocks of small-cap companies. Cleveland has testified in court that he and Royer had an agreement and the FBI agent would provide him with information about government investigations into companies and their insiders - information that Cleveland would then share with Elgindy. Cleveland said his deal with Royer was one in which trading profits reaped from the information the agent gave him would be split 50-50.
Under questions by Assistant U.S. Attorney Ken Breen, Cleveland said that he first got information about Sulphco and its insiders Chief Executive Rudy Gunnerman and Chief Financial Officer Mark Cullen in the spring of 2001. Cleveland said he shared that information with Elgindy, who shared it with members of his private investing Web site. Cleveland told jurors that Elgindy and two other members of the site, visited the company posing as potential investors and that Elgindy was trying to get a block of discounted shares from Gunnerman.
Cleveland said Elgindy discussed the block of Sulphco stocks with members in a private chat room in June 2001 and that Elgindy wanted to know how many shares of Sulphco members trading through Canadian brokerage firm Global Securities were short. Cleveland said the block trade never happened and that Sulphco was trying to stop the publication by Elgindy of a negative report about the company. Shortly thereafter, Cleveland said, Elgindy told him he had heard he was under FBI investigation and asked Cleveland to check with Royer.
Royer "told me that the idiots in the Reno FBI office were investigating Elgindy while they should be investigating Sulphco," Cleveland said. The witness told jurors that Royer later told him that he had contacted the Reno office and that Elgindy was no longer under investigation, but that the company was.
Lawrence Gerzog, Royer's lawyer, said in his opening statements earlier this week that Todd Orme, an employee of Sulphco, had filed a complaint against Elgindy, but that he later recanted it.
Cleveland pleaded guilty to conspiracy to commit securities fraud and is helping the government make its case against Elgindy and Royer. Others charged in the case in the U.S. District Court for the Eastern District of N.Y. will be tried separately.
- By Carol Remond, Dow Jones Newswires; 201-938-2074; carol.remond@ dowjones.com
Dow Jones Newswires
11-04-04 1439ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
news.morningstar.com
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Govt Witness Continues Testimony In Elgindy Case
By Carol REMOND
Of DOW JONES NEWSWIRES
402 words
4 November 2004
10:23
Dow Jones News Service
English
(c) 2004 Dow Jones & Company, Inc.
NEW YORK (Dow Jones)--Government witness Derrick Cleveland testified in court this week that he used a Federal Bureau of Investigation agent as his personal research assistant.
Cleveland said that on several occasions in 2000 and 2001, he used information gleaned from FBI agent Jeffrey Royer to better profit from short selling the stocks of small companies, some of which were under investigation by government agencies.
Cleveland pleaded guilty to conspiracy to commit securities fraud in 2002 and is assisting the government in its case against short seller Anthony Elgindy and Royer. Others charged in the case will be tried separately.
The government alleges in the U.S. District Court for the Eastern District of New York that Elgindy and other short sellers used confidential government information to trade, and on occasion, to extort free or cheap shares from companies.
On the witness stand Wednesday, Cleveland testified that after he came across a company which he thought would be a good short selling target, he would contact Royer for further information about the company and its insiders.
Cleveland said Royer passed on information about a number of companies including: Freedom Surf (FRSH), Softquad (SXML), Biopulse (BIOP), SeaView Video Technologies Inc. (SEVU) and Genesis Intermedia (GENI). Cleveland said he shared that information with Elgindy, who then passed it on to members of his private investing Web site.
Cleveland said he and Royer traveled to San Diego to personally meet with Elgindy in February 2001. At that time, Cleveland said Elgindy offered Royer a job as a researcher to help him identify fraudulent companies that could make good short selling targets. Cleveland said Royer agreed during the meeting that he would come to work for Elgindy later that year, after he left the FBI.
During that visit, Cleveland said that Elgindy thanked Royer for information the FBI agent had provided about FBI and Securities and Exchange Commission investigations into SeaView. Cleveland said that Elgindy told Royer and Cleveland that he made $750,000 in profit on his SeaView trades.
Cleveland has testified that Elgindy used confidential government information to write two negative reports about SeaView to push the stock of the company down and profit from his short selling activities.
Cleveland is scheduled to resume testimony Thursday.
-By Carol REMOND, Dow Jones Newswires; 201-938-2074 [ 11-04-04 1023ET ]
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Elgindy Jurors Won't Hear 9/11 Evidence - Judge
11-08-04 06:42 PM EST
NEW YORK (Dow Jones)--Jurors in the federal case against short seller Anthony Elgindy and former Federal Bureau of Investigation agent Jeffrey Royer won't hear evidence of Elgindy's possible prior knowledge of the Sept. 11, 2001, attacks on the World Trade Center.
Federal Judge Raymond Dearie told jurors Monday morning that Elgindy and Royer's case has nothing to do with terrorism. "You will hear no evidence that Elgindy or others were involved in 9/11," Dearie said.
Elgindy is accused of having used confidential information provided by Royer to sell short the stock of small companies. Elgindy, Royer and others were charged in the U.S. District Court for the Eastern District of New York in 2002 with securities fraud, market manipulation and extortion. Some charged in the case have pleaded guilty. Others are scheduled to be tried separately.
Federal Prosecutor Kenneth Breen shortly after the case was first brought raised the possibility that Elgindy, who was born in Egypt, may have had advance knowledge of the attacks because, in part, he tried to liquidate stock positions the day before the attacks. Elgindy's lawyers dispute that allegation.
The government's first witness in the case is Derrick Cleveland, a former trader who has pleaded guilty to conspiracy to commit securities fraud and is helping the government make its case against Elgindy and Royer. Cleveland has testified that Royer would give him information about government investigations into small companies and their insiders and that he would share that confidential information with Elgindy and members of his private investing Web site. Cleveland testified that he used the information provided by Royer to trade for himself and the former special agent.
Under questioning by Breen, Cleveland said Royer in September 2001 told him that Elgindy was being investigated for terrorism. Cleveland said he was concerned that the FBI investigation into Elgindy could jeopardize plans for the agent to go work for the San Diego short seller later that year after he left the bureau.
Cleveland told jurors Monday that Royer told him several people had reported Elgindy to the FBI after Sept. 11, including Matt Tyson, a former business partner with whom Elgindy was feuding, and John Liviakis, a stock promoter who had come under attack by Elgindy earlier that year.
Cleveland said Royer told him that he would keep an eye on the investigation into Elgindy's possible terrorist ties. In addition to Elgindy's trading, Cleveland said Royer told him the government was looking into the short seller's contribution to a charity called Mercy International.
Cleveland said the government investigation into Elgindy after Sept. 11 didn't stop or slow down the transfer of confidential information from Royer to Cleveland and Elgindy.
Cleveland later said FBI agent Lynn Wingate provided information to her then- boyfriend Royer after he left the bureau. Wingate also is charged in the case and will be tried separately.
Cleveland told jurors that Royer was concerned after he received a call from Wingate in the spring of 2002 indicating an ongoing government investigation into Elgindy's possible ties to terrorism also included an insider trading probe into Elgindy, Royer and Cleveland.
Cleveland said that when he asked Royer about the call, the former FBI agent said, "She told me to pack my (stuff) and get away as far as I can and as quickly as I can."
According to Cleveland, Royer said a new entry in the FBI file on Elgindy had Wingate very worried. Cleveland said Royer told him that Elgindy's telephones were wire-tapped and that his bank accounts could be frozen at any time.
Cleveland said that after Wingate's call, he and Royer decided to leave San Diego, where they had both moved to work with Elgindy, as soon as possible.
Cleveland is expected to conclude his testimony Tuesday morning.
-By Carol Remond, Dow Jones Newswires; 201-938-2074; carol.remond@dowjones.com
Dow Jones Newswires
11-08-04 1842ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
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UPDATE: Witness Cross Examination Begins In Elgindy Trial
By Carol REMOND
Of DOW JONES NEWSWIRES
447 words
9 November 2004
16:30
Dow Jones News Service
English
(c) 2004 Dow Jones & Company, Inc.
NEW YORK (Dow Jones)--Defense lawyers began cross-examination of government witness Derrick Cleveland in a Brooklyn, N.Y., federal courtroom Tuesday.
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.
The government alleges that Elgindy and other short sellers used the information to trade and, on occasion, to extort free or cheap shares from companies, some of which were under investigation by government agencies.
Elgindy and Royer are charged with securities fraud, market manipulation and extortion in the trial, which is being held in the U.S. District Court for the Eastern District of New York.
Cleveland has testified that he passed confidential information he got from Royer to Elgindy, who then shared it with members of his private investing Web site.
During his cross examination of Cleveland, Elgindy's lawyer, Barry Berke, highlighted the witness' past drug conviction and his experience making deals with federal prosecutors to avoid long jail time.
Under questioning by Berke, Cleveland told jurors that, on the night of his arrest in the Elgindy case, he had talked to federal agents about the possibility of making a deal. Cleveland said he was aware of the very long jail sentence he could receive if found guilty, and that he went to prosecutors to secure a deal just a month after his arrest in May 2002.
Under earlier questioning by federal prosecutors, Cleveland testified he shared information with Web site members Donald Kent Terrell and Jonathan Daws, who were also charged in the case.
Terrell, who was a member of the Web site from December 1999 to May 2002, pleaded guilty to conspiracy to commit securities fraud and is expected to testify for the government.
Daws pleaded not guilty and will be tried separately.
Also to be tried separately are Troy Peters, another trader, and Lynn Wingate, a former FBI agent who prosecutors say passed information to Royer, her then-boyfriend, after he left the bureau and went to work for Elgindy.
Cleveland has said in court that he had a deal with Royer under which any trading profits based on information the former special agent passed to him would be shared 50-50. But Cleveland said he never paid Royer any profits in the year and a half they worked together, because of steep losses early on.
-By Carol REMOND, Dow Jones Newswires; 201-938-2074 [ 11-09-04 1630ET ]
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Jurors Hear Contrasting Theories In Elgindy Federal Trial
11-10-04 02:10 PM EST
NEW YORK (Dow Jones)--Two contrasting views of the nature of the relationships between two traders and a Federal Bureau of Investigation special agent are starting to emerge in a Brooklyn courtroom.
From a vast conspiracy to use confidential government information to manipulate the stocks of publicly traded companies, to a key witness's desire to avoid a potential long jail sentence, jurors in the criminal case against short seller Anthony Elgindy and former FBI agent Jeffrey Royer are being presented with very different theories of what transpired as prosecutors and defense lawyers take turn questioning the government's first witness, a former broker and convicted drug dealer named Derrick Cleveland.
"It's really what you make of it," Federal Judge Raymond Dearie told defense lawyers and prosecutors involved in the case last week after a sidebar during which the jury wasn't present in the courtroom. There is no question that there was a relationship, the question is what was "the nature of that relationship," Dearie added.
According to federal prosecutors in the Eastern District for the District Court of New York, Cleveland would receive information from Royer and pass it on to Elgindy and members of his private investing Web site. Cleveland, Royer and Elgindy were charged in a 21-count racketeering indictment in May 2002 with charges including securities fraud, market manipulation and extortion. Cleveland has pleaded guilty to conspiracy to commit securities fraud, a count that carries a maximum sentence of 20 years, and is helping the government make its case against Elgindy and others charged in the case.
Elgindy's and Royer's lawyers have said in opening statements that their clients are innocent and that none of the alleged criminal actions listed in the indictment, and described in details by Cleveland during his testimony, took place.
Rather than the conspiracy to commit securities fraud and extort free or cheap shares from company insiders described by Cleveland during his testimony, a lawyer for Elgindy suggested in court Tuesday that 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. The lawyer, Barry Berke, also suggested that Cleveland wanted the lifestyle of then-successful stock guru Elgindy, as well as sharing his online following.
"You were seeking credibility for your work exposing companies and you wanted to impress Elgindy and others," Berke asked Cleveland during his cross- examination. The witness answered "yes".
Berke introduced evidence showing that Cleveland was enamored with Elgindy's flashy persona, emulating his choices of e-mail address and car license plate.
Cleveland has testified in court that he had an agreement with Royer to share 50/50 any trading profit based on confidential information obtained from the FBI special agent. But Cleveland said he never actually paid Royer for his research services since he never made any trading profits during the year-and-a-half he claims the agent helped him detect and target small fraudulent companies. Earlier this week, federal prosecutors established some money trail between the two, introducing evidence that Royer once wrote Cleveland a $15,000 check which Cleveland said the FBI agent asked him to invest in the stock market. Cleveland also testified that he loaned $7,000 to Royer for him to buy a pickup truck. The FBI agent had been repaying the loan, he told jurors. In more than a week of testimony, Cleveland said he and others used non-public information about government investigations into small companies obtained from Royer, to sell short the stock of these companies and sometime use the threat of using that confidential information to extort shares from them. Cleveland also testified that some of the information provided by Royer was used by Elgindy to put together negative reports that the San Diego short seller would publish on a public Web site called insidetruth.com to initiate or speed up the decline of the price of the shares of the companies he was targeting.
Short sellers typically borrow shares that they sell with the expectation the price will go down. They hope to be able later to buy back the shares at a lower price and pocket the difference before returning the shares they borrowed.
During his cross-examination of Cleveland on Wednesday, Elgindy's lawyer Berke introduced evidence suggesting that the government witness lied or exaggerated when he testified in court that confidential information gleaned from Royer was used by Elgindy to write negative reports. In fact, the defense lawyer claims, the information passed by Cleveland to Elgindy was mostly available to the public in press releases or news report.
Focusing of a bullet point sheet on a company called SeaView Video Technology Inc. that Cleveland forwarded to Elgindy, Berke got the witness to admit that some of the information which he had earlier testified he acquired from Royer, came from company press releases and postings on a public bulletin board called Raging Bull. Cleveland had testified in court under questioning by a federal prosecutor that information contained in the bullet point sheet he sent Elgindy, as well as reports critical of SeaView later written by Elgindy contained non- public government information.
Cleveland's cross-examination is scheduled to resume later Wednesday.
- By Carol S. Remond; Dow Jones Newswires; 201-938-2074; carol.remond@ dowjones.com
Dow Jones Newswires
11-10-04 1410ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
news.morningstar.com
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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
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UPDATE: FBI Agent Sought Info About Stock Fraud - Lawyer
641 words
16 November 2004
17:20
Dow Jones News Service
English
(c) 2004 Dow Jones & Company, Inc.
(Added four paragraphs at end of story detailing resumption of questioning by Elgindy's lawyer.)
By Carol S. REMOND
Of Dow Jones Newswires
NEW YORK (Dow Jones)--Former Federal Bureau of Investigation special agent Jeffrey Royer wasn't looking to profit from sharing information with traders, his lawyer told jurors Tuesday. Instead, he was attempting to find information that could help the bureau ferret out scam companies.
The government has alleged in a 2002 federal indictment that Royer passed confidential information gathered from FBI databases to online stock guru Anthony Elgindy and other short sellers. Derrick Cleveland, a former member of Elgindy's private investing Web site, testified for the government that he passed information gleaned from Royer to Elgindy and others who traded on it.
Royer and Elgindy stand accused of securities fraud, market manipulation and extortion in the Eastern District for the District Court of New York. Others charged in the case are scheduled to be tried separately. Cleveland has pleaded guilty to conspiracy to commit securities fraud and is cooperating with the government.
Cross examining Cleveland, Royer's lawyer Lawrence Gerzog tried to show that the former agent shared information with the witness because he thought Cleveland would be able to help the FBI investigate stock fraud.
"You told (Jeffrey) Royer that you could help him in the (Broadband Wireless) investigation, correct?," Gerzog asked Cleveland, who became a confidential informant for Royer in April 2000. "That was part of the reason," Cleveland answered.
Cleveland testified in court for the government that he told Royer that he would share 50/50 any profit gleaned from information passed on by Royer. Cleveland told jurors that, among other golden tidbits supposed to help him make money short selling stock, Royer gave him confidential information about an FBI investigation into Broadband Wireless International Corp. (BBAN) in early 2000.
Gerzog also asked the government witness about his testimony that Royer invited Cleveland to meet with one of his informants, a woman named Pam Humphrey. Cleveland testified in court that Royer shared with him FBI documents about two companies called Energas and Potomac Energy following the meeting with Humphrey.
Under cross examination, Cleveland agreed that the documents came from Humphrey and not the agent. Gerzog suggested that given that Humphrey was supposed to be helping the FBI in its investigation of Broadband Wireless, it made sense that the agent asked Cleveland, at the time an informant supposed to be helping the government, along for the meeting.
Gerzog also grilled Cleveland about his claim of a 50/50 deal between him and the agent given the lack of any document, telephone call or e-mail corroborating his claim of the profit-sharing agreement. "Did you talk to Royer about how you would account (to him) about the profits you did or didn't make?," Gerzog asked Cleveland, who answered "I don't remember." Cleveland admitted under questioning that his trading skills must not have been great if, as he claimed, he never made a profit from Royer's tips.
Following Gerzog's cross-examination of Cleveland, Elgindy's lawyer resumed his questioning of the witness.
Barry Berke made copious use of chatlogs from Elgindy's private Web site to challenge Cleveland's statements that he and others traded on confidential information.
In the case of Biopulse and Vital Living, two companies for which Cleveland testified he received information from Royer, Berke highlighted that significant public information in the form of news articles was available at about the same time Cleveland claimed he traded on information he received from the FBI agent.
Cleveland's cross-examination is expected to conclude Wednesday, followed by a 'redirect' by the prosecution.
-By Carol S. REMOND, Dow Jones Newswires; 201-938-2074; carol.REMOND@dowjones.com [ 11-16-04 1720ET ]
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Testimony Of First Witness In Elgindy Case Wraps Up
11-17-04 02:56 PM EST
NEW YORK (Dow Jones)--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.
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
Dow Jones Newswires
11-17-04 1456ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
news.morningstar.com
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UPDATE: FBI Computer Specialist Testifies In Elgindy Case
729 words
18 November 2004
18:43
Dow Jones News Service
English
(c) 2004 Dow Jones & Company, Inc.
(Updates with government introducing more evidence beginning in ninth paragraph.)
By Carol S. REMOND
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Jurors in a Brooklyn courtroom Thursday were given a rare look into Federal Bureau of Investigation's confidential databases.
Testifying for the government in the criminal case against trader Anthony Elgindy and former FBI special agent Jeffrey Royer, FBI information technology specialist William Long highlighted different components of the databases and their use to government agents. Long told jurors that he conducted a number of audits for the FBI documenting Royer and former special agent Lynn Wingate's use of FBI computers. Long said the databases include information about cases and individuals gathered by different field offices around the country.
Elgindy and Royer were charged in May 2002 in the Eastern District for the District Court of New York with securities fraud, market manipulation and extortion. Wingate and others were also charged and will be tried separately. Prosecutors allege that Royer, and his then girlfriend Wingate, shared confidential information with others about investigations into small companies and their insiders and about an FBI terror investigation into Egyptian-born Elgindy.
Under questioning by Assistant U.S. Attorney Seth Levine, Long highlighted for the jury Royer's and Wingate's usage of two applications within the FBI database know as Automated Case Support, or ACS.
Long showed jurors how Royer searched the FBI's Universal Index, or UNI, and Electronic Case File, or ECN, to run the names of companies and some of their shareholders or insiders.
Derrick Cleveland, the government's first witness, testified in court that Royer would tap the FBI databases for information about companies and share it with him. Cleveland said that he and Royer had an agreement to share 50/50 any profits from the FBI's agent tips. Cleveland said he would often share the confidential information gathered by Royer with Elgindy, a well-known short seller, who would then share it with members of his private investing website. Cleveland, who pleaded guilty to securities fraud and is cooperating with the government, also said that Royer told him about an FBI investigation into Elgindy after the terror attacks on the Sept. 11, 2001, World Trade Center attacks.
FBI computer specialist Long told jurors that the information accessed by Royer and Wingate isn't available to the public.
The government introduced in evidence a long list of names and cases searched by Royer, many of which were also bandied about on Elgindy's Web site, according to chatlogs presented to jurors in previous days.
Trying to make its case that FBI confidential information was leaked to Elgindy and others, the government introduced in evidence an envelope seized from the San Diego stock trader after his arrest. That envelope contained among other things a fax copy of a documents printed from the FBI database.
Documents introduced in evidence Thursday also show that details about FBI investigations into A.J. Nassar, chief officer of a company called Floor Decor Inc., information that could only come from the bureau's confidential database, made its way onto Elgindy's private Web site within minutes after Royer performed FBI searches.
Logs of Royer's and Wingate's use of the FBI database show that they were worried for themselves. The last name Royer ran on the database before leaving the FBI in December 2001 was his, and Wingate did the same in April 2002, days before her own arrest.
Robert Hansen, Elgindy's former webmaster, took the witness stand after Long completed his testimony Thursday afternoon.
Hansen hosted and managed Anthonypacific.com, Elgindy's private Web site from late 1999 until Elgindy's arrest in May 2002. Hansen was later charged in the criminal case against Elgindy and others and has pleaded guilty to conspiracy to commit securities fraud. He is cooperating with the government.
Hansen is scheduled to resume his testimony on Monday.
Chatlogs previously introduced in evidence show that Elgindy on several occasions asked Hansen to erase logs. The prosecution has suggested that Elgindy knew he was trading on insider information obtained from Royer and that he would ask Hansen to erase the logs to destroy any evidence of wrongdoing.
- By Carol S. REMOND; Dow Jones Newswires; 201 938 2074; carol.REMOND@dowjones.com [ 11-18-04 1843ET ]
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UPDATE: Elgindy's Ex-Webmaster Testifies About FBI
598 words
22 November 2004
17:17
Dow Jones News Service
English
(c) 2004 Dow Jones & Company, Inc.
(Updates with news from afternoon testimony starting in the eighth paragraph.)
By Carol S. REMOND
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Robert Hansen, the former webmaster of Anthonypacific.com, testified in a Brooklyn, N.Y., courtroom Monday that the focus of the private investing Web site began changing in late 2000, as confidential government information began making its way on the site.
Hansen was charged in the criminal case against trader Anthony Elgindy and former Federal Bureau of Investigation special agent Jeffrey Royer.
The government alleges that Royer illegally shared confidential information with Elgindy and other traders and that they used to information to sell short the shares of small companies. Hansen has pleaded guilty to conspiracy to commit securities fraud and is cooperating with the government.
Hansen hosted and managed Anthonypacific.com from late 1999 until Elgindy's arrest in May 2002. Under questioning by Assistant U.S. Attorney Ken Breen, Hansen told jurors that in late 2000, the Web site started to focus on information that Royer would pass on to Elgindy, information that the online guru would often share with his members.
Hansen testified Elgindy asked him on numerous occasions to erase chatlogs, records of online exchanges between members, when confidential information was discussed on the site. Hansen also testified that as the relationship between Elgindy and Royer developed, Elgindy began using more "private rooms," or online meeting places for which no records were kept.
In addition to asking for logs to be deleted, the former webmaster said Elgindy also requested that logs be kept for shorter period of times.
Hansen said he traded on several occasions on confidential information and that he knew that it was illegal.
Hansen's admission of guilt was the center of a sidebar between federal judge Raymond Dearie, defense lawyers and prosecutors in the case after the lunch recess.
Although the webmaster testified in court that he knew from the beginning that he and others were trading on inside information and that these trades were illegal, Hansen had first denied that he did anything wrong when he was first interviewed by FBI agents shortly after Elgindy and others were charged. Hansen now says that he made false statements to the FBI and the grand jury when he first testified in 2002. Hansen was later charged in March 2003. Without the jury present, Judge Dearie quashed a subpoena by Elgindy's defense lawyers to have access to a 48 pages letter written by Hansen's lawyer in early 2003. In that letter, the lawyer argued that Hansen shouldn't be charged in the case since there was insufficient evidence to convict him. Hansen later pleaded guilty.
"This letter was written in Hansen's behalf... we heard his testimony that at the time that he was on the site, he knew that what he was doing was illegal. Clearly we should be given an opportunity to review it," Elgindy's lawyer Barry Berke told Judge Dearie. The judge ruled that the letter was a legal document and not Hansen's statement, and he quashed the defense's subpoena to have access to the letter.
Elgindy's lawyer Joel Isaacson began cross examining Hansen later Monday.
Elgindy and Royer are being tried in the U.S. District Court for the Eastern District of New York on several counts of securities fraud, market manipulation and extortion. Other defendants are scheduled to be tried separately.
-By Carol S. REMOND, Dow Jones Newswires; 201-938- 2074; carol.REMOND@dowjones.com [ 11-22-04 1717ET ]
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=DJ Elgindy Webmaster's Change Of Heart Focus of Cross
. . By Carol S. REMOND . Of DOW JONES NEWSWIRES .
NEW YORK (Dow Jones)--Robert Hansen now says that what he, and others, did on the Anthony Elgindy's private investing Web site was illegal. But when Hansen, the site's former webmaster, first testified in front a grand jury in 2002 about what was happening on the site, he had a different story.
"You told the government (in testimony Monday) one thing and you told the grand jury another. How do we know" what is true?, defense lawyer Joel Isaacson asked Tuesday during his cross-examination of Hansen.
On Monday Hansen had testified for the government in the criminal trial of Elgindy and former FBI special agent Jeffrey Royer in the U.S. District Court for the Eastern District of New York in Brooklyn.
Elgindy and Royer were charged in May 2002 with several counts of securities fraud, market manipulation and extortion. The government alleges that Royer would share information he obtained from confidential Federal Bureau of Investigation databases with Elgindy and others, and that they would trade on the insider information.
Hansen told jurors Monday that on several occasions, he traded on confidential information obtained from Royer. He said that he knew that it was illegal.
Elgindy's lawyer Isaacson questioned Hansen Tuesday and highlighted how the witness' story changed over time. "Did you indicate to the grand jury that you didn't think that (Elgindy) would front run?" Isaacson asked Hansen. Hansen had told jurors Monday that he thought that Elgindy would trade ahead of the advice he would give members of his Web site, a practice known as front running. On Tuesday, Hansen answered Isaacson's question by saying: "my understanding is that he didn't trade against the site. But I think he may have."
Isaacson is expected to complete his cross-examination of Hansen after the lunch recess. The witness will then be questioned by Royer's lawyer, Lawrence Gerzog.
Hansen hosted and managed Anthonypacific.com, Elgindy's private investing Web site, from late 1999 until Elgindy's arrest in May 2002.
On Monday, federal Judge Raymond Dearie quashed a subpoena by Elgindy's defense lawyers to have access to a 48-page letter written by Hansen's lawyer in early 2003. In that letter, the lawyer argued that Hansen shouldn't be charged in the case since there was insufficient evidence to convict him. Hansen said Monday that he made false statements to the FBI and the grand jury when he first testified in 2002.
Hansen was charged in March 2003 and pleaded guilty to conspiracy to commit securities fraud. Other defendants are scheduled to be tried separately.
-By Carol S. REMOND, Dow Jones Newswires; 201-938-2074; carol.REMOND@dowjones.com .
(END) Dow Jones Newswires
November 23, 2004 14:33 ET (19:33 GMT)- - 02 33 PM EST 11-23-04
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=DJ Govt Presents Evidence Of Extortion In Elgindy Case
By Carol S. REMOND
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The federal government presented jurors with a number of taped telephone conversations Wednesday in its effort to prove that short seller Anthony Elgindy and others conspired to extort shares from publicly traded companies.
Elgindy and former Federal Bureau of Investigation Special Agent Jeffery Royer are on trial in the U.S. District Court for the Eastern District of New York, charged with securities fraud, market manipulation and extortion.
The government alleges that Royer used FBI databases to gather information about small companies and their insiders, information that he would often share with Elgindy and others, who used it to profit from selling short the stock of these companies.
The government also maintains Elgindy and others, on at least two occasions, attempted to use information illegally obtained by Royer to extort cheap or free shares from companies they targeted in their short selling scheme. The two companies are Floor Decor Inc. and Nuclear Solutions Inc.
In the case of Nuclear Solutions, federal prosecutors say Elgindy contacted Paul Brown, the company's chief executive, in late 2001 and attempted to use what turned out to be incorrect information about Brown's previous felony conviction to scare the executive into agreeing to a deal under which he would sell a discounted block of 300,000 to 350,000 shares. The shares could then be used by Elgindy and members of his private investment Web site to cover their short positions in Nuclear Solutions stock.
Testifying for the prosecution in the Brooklyn courtroom, Tina Franco, Brown's sister, told jurors that as his secretary, she would transfer all incoming calls to her brother, who would often tape them. Franco testified that her brother, who since died in a car accident, began receiving telephone calls from Elgindy on Dec. 19, 2001. She said other people who called at about the same time were Troy Peters, Roland Chapin, A.J. Nassar, broker David Slavny and former market maker John Fiero. Franco said she heard most of the taped calls, since she was asked by her brother to transcribe the recordings, which he
planned to give to the FBI.
Peters, a former broker at investment firm First Geneva in San Diego, is also charged in the case and will be tried separately. Chapin was Peters' boss at First Geneva. Nassar is the former chief executive of Floor Decor. Slavny was at the time an investment banker with J.P. Turner & Co. LLC, which with First Geneva was purportedly trying to help Nuclear Solutions raise money.
Fiero was barred by the National Association of Securities Dealers in 2001 for violating NASD and federal securities laws in manipulating small stocks. He is not charged in the case.
Franco told jurors that her brother was very upset by Elgindy's telephone calls, the tapes of which were played in open court. In two calls on Dec. 19, Elgindy could be heard harassing Brown about a previous conviction, which the short seller didn't know had been dismissed, and about the validity of Brown's college diploma. Prosecutors also played for the court tapes of several telephone conversations between Brown and Peters. In those tapes, Peters was heard trying to reassure Brown that because he knew and was a friend of Elgindy, he could work out a deal to make short sellers who had been pressuring the stock of Nuclear Solutions "go away."
In one call, Peters could be heard telling Brown that Elgindy was not the only powerful short seller targeting Nuclear Solutions, and that Fiero and his firm, Fiero Brothers Inc., were also involved. Peters said in the call that he could easily take care of Elgindy, but that Fiero was a major force that also needed to be dealt with. Peters told Brown Elgindy would need about 100,000 shares and that Fiero would need 200,000 shares to cover their existing short positions in the stock of Nuclear Solutions.
In a later conversation also heard in court, Peters offered to put together an investment banking deal under which free trading shares could be transferred to Elgindy and Fiero to make them go away. Elgindy's lawyers tried unsuccessfully to prevent the prosecution from introducing the recordings into evidence, claiming that their authenticity was in question. In particular, Elgindy's lawyers argued that tapped conversations between Fiero and Brown should not be admitted in evidence. In one call, discussed with the judge in a sidebar without jurors present, Fiero could be heard telling Brown that he should go to the FBI because the deal sounded like extortion. Franco is scheduled to resume her testimony after lunch. Nassar is
expected to testify Thursday.
-By Carol S. REMOND, Dow Jones Newswires; 201-938- 2074;
carol.REMOND@dowjones.com
(END) Dow Jones Newswires
12-01-04 1526ET
- - 03 26 PM EST 12-01-04
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Elgindy Was A Compliant Probationer - Probation Officers
By Carol S. REMOND
Of DOW JONES NEWSWIRES
455 words
2 December 2004
13:53
Dow Jones News Service
English
(c) 2004 Dow Jones & Company, Inc.
NEW YORK (Dow Jones)--Notorious short seller Anthony Elgindy's probation officers testified Thursday that he was a compliant probationer who submitted required documents.
Elgindy is charged with securities fraud, market manipulation and extortion in the U.S. District Court for the Eastern District of New York. The government alleges that former FBI agent Jeffery Royer used FBI databases to gather information about small companies and their insiders, information that he would often share with Elgindy and others who used it to profit from selling short the stock of these companies.
At the time of his arrest in May 2002, Elgindy was on probation for a 2000 mail fraud violation.
Probation officers Mark Riedling and Laurie Bryant told jurors that Elgindy was submitting, as required by the terms of his probation, monthly statements about his contacts with law enforcement officers as well as financial statements about his bank accounts.
Federal prosecutors alleged that Elgindy had furtive and illegal contacts with FBI agent Royer and other law enforcement officers and that he would use the non-public information he obtained from them to manipulate the stock of small companies.
Responding to questions by one of Elgindy's lawyers, Riedling told jurors that the San Diego short seller would provide him with details about his contacts with law enforcement officers, including his dealings with agent Royer. Elgindy also provided Riedling with a copy of Royer's business card.
Copies of monthly reports submitted by Elgindy to his probation officers show that he provided names and telephone numbers for his contacts as well as copies of the investment reports he published on his website. Elgindy would also provide his probation officers with information about investigations started by the FBI and the Securities and Exchange Commission as the results of information he said he provided to them.
Bryant testified that Elgindy traveled to Lebanon in the fall of 2001 without proper authorization. But she said that when she asked Elgindy where he traveled to, he told her that he went to Egypt and Lebanon. The probation office had given permission to Elgindy to travel to Egypt where he was born.
Bryant said Elgindy never told her he bought a house in Lebanon or that he transferred funds to Egypt and Lebanon.
SEC lawyer Doug Gordimer is scheduled to testify after the lunch recess. Previous witnesses testified that Royer used his job as an FBI agent to gather information from SEC lawyers, including Gordimer, and that he would share that insider information with Elgindy and others.
-By Carol S. REMOND, Dow Jones Newswires; 201 938 2074; carol.REMOND@dowjones.com [ 12-02-04 1353ET ]
=====
SEC Lawyer Says He Used Elgindy's Web Site To Get Info
By Carol S. REMOND
Of DOW JONES NEWSWIRES
585 words
2 December 2004
17:36
Dow Jones News Service
English
(c) 2004 Dow Jones & Company, Inc.
NEW YORK (Dow Jones)- After four weeks of testimony, there is little doubt that trader Anthony Elgindy had contacts with law enforcement officers, including agents of the Federal Bureau of Investigation and lawyers from the Securities and Exchange Commission.
What is still a question for jurors is whether Elgindy, and others charged with him in a case involving fraud, market manipulation and extortion, had any criminal intent when they shared information and traded on it.
"Were these contacts with law enforcement motivated by an honest endeavor to make money or was it something else?" federal judge Raymond Dearie told lawyers and prosecutors involved in the case Thursday.
Elgindy and former FBI special agent Jeffrey Royer are on trial in the U.S. District Court for the Eastern District of New York. The government alleges that Royer used FBI databases as well as his contacts with SEC officers to gather information about small companies and their insiders, information that he would often share with Elgindy and others who used it to profit from selling short the stock of these companies.
Witnesses for the government, some of whom pleaded guilty in the case and have signed cooperation agreements, have testified that Royer shared confidential information with them and that they traded on it. FBI technical personnel have also testified about Royer's use of government databases. And federal prosecutors have introduced evidence showing that details of government investigations into companies or their insiders ended up on Elgindy's private investment Web site.
But questions about who told what to who emerged Thursday during the testimony of Doug Gordimer, the head of the SEC's Fort Worth, Texas, office.
According to the earlier testimony of cooperating witness Derrick Cleveland, Royer would use his friendship with Gordimer to gather information about SEC investigations into companies. Royer would then share that information with Elgindy and members of his Web site. Cleveland pleaded guilty of conspiracy to commit securities fraud in the case in 2002.
Testifying for the government Thursday, Gordimer said he talked often with Royer and the FBI agent would call him and pass information about possible scams. Gordimer testified that he would look up names of insiders and companies and often share information with the then FBI agent.
Gordimer told jurors that he visited Elgindy's public Web site called insidetruth.com on several occasions to check out information about companies written up and targeted by Elgindy.
But under cross-examination by Royer's lawyer, Gordimer said that on occasions it was Royer who would pass information to Gordimer and that, at times, that information led to the SEC opening investigations into companies. Gordimer testified that in the case of one company, the SEC opened an informal investigation the day after Royer passed information to him.
Gordimer said that Royer told him in January 2001 that his source of information for most of the scams he was calling the SEC lawyer about was Elgindy. Gordimer said he understood that Royer got his information from Elgindy and his Web site.
Gordimer agreed with defense lawyers that on occasions the information contained on the insidethruth Web site was useful.
"The Web site was a way for you to get information, correct?" one of Elgindy's lawyers asked Gordimer. Gordimer answered yes.
-By Carol S. REMOND, Dow Jones Newswires; 201-938-2074; carol.REMOND@dowjones.com [ 12-02-04 1736ET ] |
