Updated update.11 Dec 2004 00:12 GMT UPDATE: Prosecution Case Vs. Elgindy Lingers On
Copyright © 2004, Dow Jones Newswires
By Carol S. Remond
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Just one more day. That's the promise that federal judge Raymond Dearie made to jurors in his Brooklyn courtroom Friday afternoon.
Federal prosecutors had been expected to conclude their fraud case against short-seller Anthony Elgindy and former Federal Bureau of Investigation special agent Jeffrey Royer on Friday. But as the testimony of FBI special agent David Chaves continued after lunch, it quickly became apparent that more time would be needed for defense lawyers to cross-examine him.
Chaves was the case agent for the FBI investigation into potential links between Elgindy and terrorism after 9-11. That terror investigation started a chain of events that resulted in the current charges against Elgindy, Royer and three others who will be tried separately.
In five weeks of testimonies, witnesses for the prosecution, some of which pleaded guilty and made deals with the government, have told jurors how FBI agent Royer would share confidential information with Elgindy and others who would use it to manipulate the stock of small companies.
Elgindy, Royer and others are charged in the U.S. District Court for the Eastern District of New York with securities fraud, market manipulation and extortion.
Defense lawyers for Elgindy and Royer will now start putting forward witnesses Monday to substantiate their contention that Royer was simply trying to uncover securities fraud and that he developed a relationship with Elgindy and others to do so. Elgindy's lawyers have said that the San Diego short seller would pass information about crooked companies to Royer who would then pass it on to others at the FBI or the Securities and Exchange Commission. Elgindy's lawyers have said they will call SEC lawyers to show that the short seller and online stock guru would share information about stock fraud with them.
Prosecutors and defense lawyers late Friday argued in front of judge Dearie - without the jurors present - about the defense's plan to have former members of Elgindy's private investment Web site testify. Prosecutors argued that they should be allowed to interview the potential witnesses before they took the stand, particularly because of the potential danger of self-incrimination.
The government has previously alleged that members of the Web site may have been engaged in the same crimes as Elgindy, Royer and others are charged with. A number of unidentified Web site members have been fingered by the prosecution as unindicted co-conspirators and could potentially be charged in the case if the government chose to.
Defense lawyers argued that any interaction with prosecutors or FBI agents prior to their testimony could intimidate the witnesses and affect their willingness to testify.
Court proceedings are expected to resume at 11 a.m. Monday.
FBI agents who testified for the prosecution earlier this week said that Royer freely admitted that he planned to work for Elgindy and other short sellers after he left the Federal Bureau in December 2001.
According to the testimony of FBI special agent Raymond Gonzales, Royer said he wanted to open a private investigation business and work with short sellers to uncover scams. Gonzales said Royer told him in December 2001 that he wanted to expose crooked companies because he himself had once lost a large investment in a bogus company.
Gonzales testified that Royer, who was then aware of the FBI investigation into Elgindy and potential ties to terrorism, offered to help the Bureau's probe.
E-mails introduced in court showed that Royer asked Elgindy about how to best deal with his mounting debts. But Elgindy's answers indicated that the short seller was mostly preoccupied with securing an early release for his probation relating to a past mail-fraud infraction. Witnesses testified that Elgindy made it a condition that his probation was terminated before Royer could start working for him. Elgindy asked Royer to write a letter supporting his early release from probation. Royer eventually wrote that letter.
FBI supervisory special agent Doug Beldon told jurors Friday that it was improper for Royer to write a letter of recommendation for Elgindy in his capacity as an FBI agent. He said the FBI was not aware of it and wouldn't have approved it.
Beldon, who in May 2002 was part of a team of agents that arrested Royer, said that Royer was compliant and that he freely admitted to using FBI databases to check out some information he got from Elgindy and another defendant named Derrick Cleveland. Cleveland pleaded guilty to conspiracy to commit securities fraud and testified earlier for the government.
- By Carol S. Remond, Dow Jones Newswires; 201-938-2074; carol.remond@dowjones.com
(END) Dow Jones Newswires
12-10-04 1912ET
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