Re: 12/6-12/16/04 - [Elgindy] Carol Remond Reports from the Dow Jones Newswires
Witness Says He Got Confidential Info From Elgindy Site
12-06-04 05:49 PM EST
NEW YORK (Dow Jones) -A former member of Anthony Elgindy's investing Web site testified Monday that he received confidential information from other members.
Minnesota insurance agent Donald Kent Terrell told jurors that he received information about companies and insiders that he knew came from the Federal Bureau of Investigation or the Securities and Exchange Commission.
Terrell was charged earlier this year and pleaded guilty to conspiracy to commit securities fraud. Terrell is helping the government make its case that Elgindy, former FBI agent Jeffrey Royer and others conspired to use confidential information to sell short the stock of small companies.
Terrell told jurors that he received inside information from Derrick Cleveland, another defendant in the case who pleaded guilty to conspiracy to commit securities fraud, and from Elgindy's private investment Web site.
Terrell said that he knew it was illegal to trade on that information but that he did because he thought it was very valuable. Terrell, who used the alias Quack on Elgindy's Web site, said he wired $2,000 to Cleveland in November 2001 and said that his understanding was that the money would be used to keep FBI agent Royer happy. Cleveland testified in court that he solicited money from Terrell but that he never shared it with Royer.
The prosecution is expected to conclude its presentation Tuesday. After that the defense will start calling witnesses.
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. The government alleges that they used confidential information illegally obtained by then FBI agent Royer to target small companies.
-By Carol S. Remond, Dow Jones Newswires, 201-938- 2074; carol.remond@ dowjones.com
Dow Jones Newswires
12-06-04 1749ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
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Former CEO Testifies In Elgindy Extortion Trial
12-07-04 09:36 AM EST
NEW YORK (Dow Jones)--A.J. Nassar, former chief executive officer of Floor Decor Inc. (FLOR), testified that he agreed to a deal back in August 2001 to make short seller Anthony Elgindy go away.
Nassar told jurors in a Brooklyn, N.Y., courtroom late Monday a shareholder told him Elgindy was targeting his company. Nassar said that he soon started putting out feelers to see how to deal with the situation. He said an investment banker friend named David Slavny suggested that Nassar contact Troy Peters, a broker in San Diego who worked at a firm called First Geneva. The firm was also doing business as Valhalla Capital LLC.
Elgindy and Peters were charged in May 2002 the U.S. district Court for the Eastern District of New York with securities fraud, market manipulation and extortion. The government alleges that they used confidential information illegally obtained by then Federal Bureau of Investigation special agent Jeffrey Royer to target small companies. Elgindy and Royer are now on trial before Federal judge Raymond Dearie. Peters is scheduled to be tried separately.
Nassar said that Slavny put him in touch with Peters who told the chief executive officer that he could help Floor Décor get rid of Elgindy. According to Nassar, Peters told him that if a block of stock was made available to Elgindy at below market price, the short seller would go away.
On cross-examination by Elgindy's lawyer Barry Berke, Nassar said he never talked to Elgindy and that he didn't know for sure whether any shares actually went to the short sellers.
Nassar's description of the transaction entered into by Floor Decor in August 2001 mirrored one presented by prosecutors last week regarding another company called Nuclear Solutions Inc. (NSOL). Prosecutors allege that Elgindy and Peters extorted shares from Floor Decor and Nuclear Solutions by promising to leave the companies alone and stop short selling their shares if they were given cheap or free stock. Defense lawyers have argued that the deals were nothing else than arranged block transactions like many taking place on Wall Street on a daily basis.
Nassar testified Monday that Peters, whom he knew from previous stock dealings, contacted him later in 2001 to ask that he vouch for Peters. Nassar said Peters asked him to tell Paul Brown, Nuclear Solutions' chief officer, who was then a target of Elgindy, that he could successfully get rid of the short seller.
Tapes played in court show that Nassar talked to Brown and recommended the services of Peters. Referring to Slavny and Peters, Nassar can be heard telling Brown that the two brokers were "pretty stand up guys" who did what they said they would do. "If Troy says he can get rid of him, he will," Nassar told Brown.
By Carol S. Remond, Dow Jones Newswires; 201-938- 2074; carol.remond@ dowjones.com
Dow Jones Newswires
12-07-04 0936ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
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UPDATE: Prosecution Case Vs. Elgindy Lingers On
12-10-04 07:12 PM EST
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
Dow Jones Newswires
12-10-04 1912ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
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Prosecution To Rest Criminal Case Vs. Elgindy Friday
12-10-04 02:15 PM EST
NEW YORK (Dow Jones)--Federal prosecutors Friday are almost done presenting evidence in their securities fraud case against short seller Anthony Elgindy and former Federal Bureau of Investigation special agent Jeffrey Royer.
In five weeks of testimony, witnesses for the prosecution, some of whom pleaded guilty and made deals with the government, told jurors how FBI agent Royer would share confidential information with Elgindy and others who used it to manipulate the stocks 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 are expected later Friday to start putting forward witnesses 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 shared information about stock fraud with them.
FBI agents who testified for the prosecution earlier this week said that Royer admitted freely that he planned to work for Elgindy and other short sellers after he left the FBI 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 a post-Sept. 11 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 he was mostly preoccupied with securing an early release from 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.
Special agent David Chaves is expected to conclude his ongoing testimony later this afternoon.
-By Carol S. Remond, Dow Jones Newswires; 201-938-2074; carol.remond@ dowjones.com
Dow Jones Newswires
12-10-04 1415ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
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Elgindy Defense To Call Ex-Site Member As First Witness
12-13-04 02:40 PM EST
NEW YORK (Dow Jones)--Anthony Elgindy's defense lawyers switched gear Monday, announcing they would put on as their first witness a former member of Elgindy's private investing Web site.
Online stock guru Elgindy and former Federal Bureau of Investigation special agent Jeffrey Royer are charged in the U.S. District Court for the Eastern District of New York with securities fraud, market manipulation and extortion. The government alleges that Royer passed confidential government information to Elgindy and members of his Web site who used it to profit from selling short the shares of small companies.
Defense lawyers for Elgindy are expected to put forward as their first witness Peter Michaelson, a former member of Elgindy's private Web site later Monday after they complete their cross-examination of FBI agent David Chaves. Elgindy's lawyers had said Friday they would call as first witnesses SEC lawyers to show that Elgindy would share information about stock fraud with them.
Prosecutors and defense lawyers continued arguing Monday about the defense's plan to have former members of Elgindy's private investment Web site testify. On Friday, prosecutors argued that they should be allowed to interview the potential witnesses before they took the stand, particularly because of the potential danger for 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 sites members have been fingered by the prosecution as unindicted co-conspirators, who possibly traded on confidential information.
Early Monday, speaking in front of federal Judge Raymond Dearie and without the jury present, prosecutor Ken Breen voiced concern about Michaelson's testimony, saying that he had reviewed his trading records. Breen was interrupted by Barry Berke, one of Elgindy's lawyers, who asked that the conversation continue in a sidebar away from the ears of people present in the courtroom.
Defense lawyers had argued Friday that any interaction with prosecutors or FBI agents prior to their testimony could intimidate the witnesses and affect their willingness to testify.
-By Carol S. Remond, Dow Jones Newswires; 201-938-2074; carol.remond@ dowjones.com
Dow Jones Newswires
12-13-04 1440ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
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Defense Witness Michaelson Continues Elgindy Testimony
12-14-04 02:59 PM EST
NEW YORK (Dow Jones)--Court testimony in the criminal case against online stock guru Anthony Elgindy got off to a slow start Tuesday with defense lawyers calling a sidebar to discuss matters related to the trial.
It's unclear just what was discussed with federal Judge Raymond Dearie during a half-hour sidebar without jurors present. But at one point, Barry Berke, one of Elgindy's lawyers, appeared concerned about the impact of news articles on potential witnesses.
Elgindy and former Federal Bureau of Investigation Jeffrey Royer are charged in the U.S. district court for the Eastern District of New York with securities fraud, market manipulation and extortion. Prosecutors allege that Elgindy and others received confidential information from Royer and illegally profited from it. Defense lawyers have argued that Royer was trying to gather information from Elgindy and that the short seller gathered some information of his own in the process.
The first sidebar early Monday was immediately followed by another one to discuss a question that Peter Michaelson had about the court proceedings.
Michaelson, the defense's first witness, was one of the members of Elgindy's private investing Web site. It's not clear what question Michaelson had for Dearie but he spent some times reviewing transcripts of previous sidebars before court resumed a full hour later.
This was the second sidebar for Michaelson who already privately spoke with Dearie, defense lawyers and prosecutors Monday about the potential danger for the witness to self incriminate. Michaelson is testifying without legal representation.
The government has previously alleged that members of the Web site may have been engaged in the same crimes as Elgindy and Royer are charged with. A number of unidentified site members have been fingered by the prosecution as unindicted co-conspirators, who possibly traded on confidential information.
In his second day of testimony, Michaelson said that he didn't think that Elgindy and others on Anthonypacific.com, the Web site set up by Elgindy for other like-minded short sellers, obtained information illegally. Michaelson posted under the name Peter on the site. Michaelson said that his understanding was that Elgindy would on occasion glean information from law enforcement personnel in the process of sharing information with them.
The witness said site members had an understanding that information discussed on the site wasn't supposed to be discussed with nonmembers. Prosecutors alleged that Elgindy's desire for secrecy showed that he knew he wasn't supposed to have the information he and others traded on.
Michaelson is expected to continue his testimony after the lunch recess.
Prior to jurors entering the Brooklyn courtroom Tuesday morning, defense lawyers also argued the merit of their subpoena of Bloomberg News reporter David Evans. Bloomberg has filed a motion to quash the subpoena. Berke told judge Dearie that he wants Evans to testify about a call the reporter made to Elgindy shortly before his arrest in May 2002. Berke said in court that Evans called Elgindy and told him that he was about to be arrested and that FBI agent Royer was already under arrest.
- By Carol S. Remond, Dow Jones Newswires; 201-938- 2074; carol.remond@ dowjones.com
Dow Jones Newswires
12-14-04 1459ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
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Govt Continues Questioning Of Elgindy Defense Witness
12-15-04 03:31 PM EST
NEW YORK (Dow Jones)--Prosecutor Kenneth Breen continued his cross-examination of Peter Michaelson Wednesday morning in the government's case against short seller Anthony Elgindy.
Elgindy and former Federal Bureau of Investigation Jeffrey Royer are charged in the U.S. District Court for the Eastern District of New York with securities fraud, market manipulation and extortion.
Michaelson, a former member of Elgindy's private investment Web site, was called to testify for the defense earlier this week.
Michaelson testified for the defense that he never thought that anything illegal was taking place when confidential government information was shared by members of the Web site. Prosecutors allege that Elgindy and others received confidential information from Royer and illegally profited from it. The government claims that Elgindy and others used his private investment site called Anthonypacific.com to share confidential information.
Under cross-examination by Breen, Michaelson said Wednesday that he thought that if government information was shared on the Elgindy site, it must have been okay. Asked whether he thought that Elgindy was credible when he posted information that he said came from the FBI. "Not all the time... He lied all the time, exaggerated to make himself look good," Michaelson answered.
Michaelson had testified Tuesday that he had no reasons to believe that Elgindy was not being truthful when he said he had confidential information. Asked about his different answer, Michaelson said "Yesterday, I don't know what I said yesterday. I was really tired."
"Are you saying that we should disregard your testimony (from Tuesday)?" Assistant U.S. Attorney Breen asked Michaelson, who answered, "I rather you would."
Reviewing his trading records, including some from an account at Canadian brokerage firm Union Securities, Michaelson said he did trade in the stock of companies for which Elgindy provided confidential information on the same days that the information was posted on the investing site. Under questioning, Michaelson also said that he purchased some of the shares of a block trade put together by Elgindy in the stock of Nuclear Solutions Inc. (NSOL). Prosecutors allege that Elgindy and others charged in the case extorted discounted stock from companies they targeted in exchange for halting their short selling of their shares. Nuclear Solutions is one of two companies that the government said was extorted by Elgindy and others charged in the case.
Michaelson is scheduled to resume his testimony after the lunch recess.
-By Carol S. Remond, Dow Jones Newswires; 201-938-2074; carol.remond@ dowjones.com
Dow Jones Newswires
12-15-04 1531ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
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SEC Lawyer Testifies In Elgindy Case, Judge Frustrated
12-16-04 02:18 PM EST
NEW YORK (Dow Jones)--A lawyer for the Securities and Exchange Commission said Thursday that he welcomed information from sources about possible securities fraud.
But the lawyer said the process was a one-way street. "There is no give. I'm glad to receive information from any source, but they get no information from me," SEC Lawyer Brent Baker told defense counsel Barry Berke.
Baker was called to testify by online stock guru and short seller Anthony Elgindy's defense team. Elgindy and former Federal Bureau of Investigation Jeffrey Royer are standing trial in the U.S. District Court for the Eastern District of New York. They, and three others to be tried separately, are charged with securities fraud, market manipulation and extortion.
The government alleges that Elgindy used his Web site to share confidential information he illegally obtained from Royer and that Elgindy and others traded and profited from it. Defense lawyers for Elgindy and Royer have argued that Royer was trying to gather information from Elgindy and that in the process he may have gathered some information of his own.
Questioning Baker about the process through which he collects information, Berke asked the SEC lawyer about his contacts with an Internet poster named Floyd Schneider. Schneider uses the alias "truthseeker" online.
Berke introduced e-mails between Baker, Schneider and Elgindy to support the defense's contention that in the process of sharing information with law enforcement personnel, Elgindy was able to glean information from them too.
Meanwhile, federal Judge Raymond Dearie appeared to grow exasperated with the length of Berke's examination of witnesses. During a break without jurors present, Dearie admonished Elgindy's defense lawyer to get to the point. When Berke argued that the prosecution took a long time itself to present the government's case, Dearie answered: "It's not length, it's about relevance. There is no contested issue about Elgindy having long relationships with the SEC and (whomever else)....My frustration has nothing to do with length, it's the length compared to the relevance."
Baker is expected to resume his testimony after the lunch recess. At least one more SEC lawyer is expected to testify after that.
- By Carol S. Remond, Dow Jones Newswires; 201-938-2074; carol.remond@ dowjones.com
Dow Jones Newswires
12-16-04 1418ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
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SEC Lawyer Testifies In Elgindy Securities Fraud Case
12-16-04 08:58 PM EST
NEW YORK (Dow Jones)--A lawyer for the Securities and Exchange Commission was so spooked when he got a telephone call from then Federal Bureau of Investigation Jeffrey Royer out of the blue that he called the FBI to check that the agent was in fact working for the government.
Testifying in a Brooklyn courtroom in the criminal case against Royer and short seller Anthony Elgindy, Brian Bressman said that he first heard from Royer in November 2001 and that the agent told him that he had an informant who had information about stock bribes being paid to brokers at brokerage firm Salomon Grey. Bressman is now senior counsel in the enforcement division at the SEC in Washington, D.C.
Elgindy and Royer are charged in the U.S. District Court for the Eastern District of New York with securities fraud, market manipulation and extortion. The government alleges that Elgindy used his Web site to share confidential information he illegally obtained from Royer and that Elgindy and others traded and profited from it.
Bressman told jurors that Royer's call was not normal procedure and that typically he would typically first hear from an Assistant U.S. Attorney before receiving calls from FBI agents working cases possibly related to SEC probes. The SEC senior counsel also said that at the time, he checked Royer out with another SEC lawyer in Texas named Doug Gordimer. Gordimer testified in the case earlier this month.
Bressman said Royer told him in a series of conversations that he had a female informant who could help him develop an ongoing investigation into a company called Freedom Surf. He said one day the agent telephoned him and said that Tony, the informant, would call Bressman. Bressman said someone identifying himself as Al did call with information about Freedom Surf and cash bribes at Salomon Grey.
Bressman and two other SEC employees were called to testify Thursday by Elgindy. Elgindy's defense lawyers are trying to support their contention that Elgindy has on several occasions passed information to law enforcement personnel and that he could have gleaned details of ongoing probes from them during the exchanges. Defense lawyers have also argued that Royer was simply trying to gather information from Elgindy and other short sellers and that in the process he may have shared confidential government information with them in the process.
SEC lawyers said that they exchanged telephone calls or e-mails with Elgindy, but they insisted that they didn't share nonpublic information with him in the process.
Also testifying Thursday was John Sten, a former SEC lawyer now working in private practice. Sten told jurors Elgindy provided him with valuable information during an SEC investigation in 1996 and 1997. But on cross- examination, Sten said that Elgindy testified for the SEC as an accomplice in the scheme and that his testimony involved details of his participation in the illegal short selling scheme that took place at the time.
Earlier Thursday, SEC lawyer Brent Baker testified that the SEC information- gathering process was a one-way street. "There is no give. I'm glad to receive information from any source, but they get no information from me," Baker told defense counsel Barry Berke.
Questioning Baker about the process though which he collects information, Berke asked the SEC lawyer about his contacts with an internet poster named Floyd Schneider. Schneider uses the alias "truthseeker" online.
Berke introduced e-mails between Baker, Schneider and Elgindy to support the defense contention that in the process of sharing information with law enforcement personnel, Elgindy was able to glean information from them too.
Federal Judge Raymond Dearie appeared to grow exasperated with the length of Berke's examination of witnesses. During a break without jurors present, Dearie admonished Elgindy's defense lawyer to get to the point. When Berke argued that the prosecution took a long time itself to present the government's case, Judge Dearie answered: "It's not length, it's about relevance. There is no contested issue about Elgindy having long relationships with the SEC and (whomever else) ....My frustration has nothing to do with length, it's the length compared to the relevance!"
Testimony in the case is expected to resume Monday. Royer is expected to testify once Elgindy's lawyers conclude their defense. The trial, which had been predicted to last six weeks and conclude before Christmas, is now expected to continue into early 2005.
- By Carol S. Remond, Dow Jones Newswires, 201 938 2074; carol.remond@ dowjones.com
Dow Jones Newswires
12-16-04 2058ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
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