SEC Lawyer Testifies Agency Was Probing Elgindy In 2001
12-20-04 03:49 PM EST
NEW YORK (Dow Jones)--The Securities and Exchange Commission was investigating short-seller Anthony Elgindy in the summer of 2001, SEC Lawyer Robert Long testified in court Monday.
Elgindy and former Federal Bureau of Investigations Special Agent Jeffrey Royer are standing trial in 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 a private investing Web site to share and trade on confidential information he obtained from Royer.
Elgindy and Royer were charged in May 2002, following an FBI investigation that began as a probe into trading activities following the Sept. 11, 2001 terrorist attacks on the U.S. It is unclear whether the previously unknown SEC investigation into Elgindy related to any of the charges he currently faces in Brooklyn.
SEC lawyer Long was called to testify by Elgindy's defense Monday. Defense lawyers are attempting to demonstrate to jurors that Elgindy and others had numerous contacts with SEC and other law enforcement personnel and that they have may gleaned confidential information from these contacts.
Long testified that in early 2001, he was contacted by Royer, who told him he had a source, who later turned out to be Elgindy, with good information about a company called Genesis Intermedia, which traded under the ticker symbol GENI. Long said he talked to Elgindy, who shared information about the company and some of its insiders with him.
Under cross-examination by Assistant U.S. Attorney Kenneth Breen, Long said he learned of an SEC investigation into Elgindy in the summer of 2001 while talking to another SEC lawyer. Long said the SEC lawyer told him Elgindy was of " questionable character" and as a result, he searched Elgindy's name in the SEC database. Elgindy's lawyer, Barry Berke, objected to Long's statement, and federal Judge Raymond Dearie ordered the clerk of the court to strike Long's comment from the record.
Another SEC lawyer is expected to testify after the lunch recess.
Meanwhile, Elgindy's defense team appears to have given up its efforts to subpoena Bloomberg reporter David Evans. Elgindy had tried to compel Evans to testify about a call the reporter made to the short-seller shortly before his arrest on May 21, 2002. Apparently, Evans had learned that Royer had been arrested and called to ask Elgindy whether the FBI was at his office.
Lawyers for Bloomberg and Evans last week argued in front of Judge Dearie that the reporter should not be forced to testify. Elgindy's lawyers appeared to think that statements made during the conversation between Elgindy and Evans could help explain why Elgindy told an FBI agent, shortly after his arrest, that he didn't give money to Middle Eastern charities. Early testimony in the case shows that the FBI was investigating Elgindy's contribution to Mercy International. According to news reports, the now defunct Mercy International was used to funnel money to terror organization Al-Qaida in the past.
-By Carol Remond, Dow Jones Newswires; 201-938-2074; carol.remond@dowjones.com
Dow Jones Newswires
12-20-04 1549ET
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