"Energas, Potomac Energy and Arrow Environment Group, three companies related to his investigation of another Oklahoma-based company called Broadband Wireless International (BBAN) in the spring and summer of 2000."
"UPDATE: Prosecutor: Ex-FBI Agent Traded In Cos He Probed
01-05-05 05:48 PM EST
(Adds additional testimony and background information beginning in the 11th paragraph.)
By Carol S. Remond
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Former FBI special agent Jeffrey Royer invested in the stocks of companies he was looking into while working in Oklahoma City, prosecutors maintained in a Brooklyn courtroom Wednesday.
Evidence introduced in the criminal case against short seller Anthony Elgindy and Royer shows that the former agent traded in the stock of Energas, Potomac Energy and Arrow Environment Group, three companies related to his investigation of another Oklahoma-based company called Broadband Wireless International (BBAN) in the spring and summer of 2000.
Royer had also traded in Broadband Wireless stock shortly before he opened an FBI inquiry into the company and an insider named Don Knight. Royer told jurors Wednesday that he didn't inform his supervisor about his trading at the time of the opening of the Broadband Wireless probe because it "was not my responsibility. I thought (my previous supervisor) had told him."
Royer and Elgindy 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 classified government information to Elgindy and others, who used it to profit from selling short the stock of companies and on occasion, extort discounted shares from them.
Testifying in his own defense, Royer told jurors this week that he shared information with Elgindy and others only for the purpose of gathering new information. The former FBI agent said he did not violate FBI guidelines prohibiting the sharing of confidential information because he was working to eradicate stock fraud. Royer was assigned to a securities fraud squad in Oklahoma City until August 2000, and he worked on crimes on Indian reservations from September 2000 to December 2001 when he left the bureau and went to work for Elgindy.
Royer told jurors Wednesday that he received documents related to potential stock fraud at Potomac and Energas from an informant in June 2000. Under cross- examination by Assistant U.S. Attorney Seth Levine, Royer said he didn't think it was wrong for him, two alleged associates also charged in the case, and his former girlfriend, to trade in the stocks because the companies were not under investigation at the time.
"Nothing was going on (at Energas and Potomac)...I did not consider (the documents) as evidence," Royer told prosecutor Levine.
Yet, evidence shows that just two months later, Royer included Energas and Potomac in a proposal for an undercover FBI task force as examples of the type of securities fraud that the task force would be able to crush.
Evidence introduced in court Wednesday also showed that Royer passed himself as an FBI agent in the spring of 2002, months after he left the bureau. A tape recording showed that Royer introduced himself as an agent working for the bureau in Oklahoma City to a Securities and Exchange Commission attorney.
E-mails between Royer and Elgindy showed that the two worked together to make sure that the former agent would not leave the bureau before he signed a letter of recommendation to support the early release of Elgindy from probation related to an insurance fraud case for which the San Diego short seller did time in Texas in 2000.
The FBI probe into Elgindy and Royer started out as a terrorism investigation following the Sept. 11 attacks in the U.S. and later shifted into a securities fraud case.
Documents introduced in evidence show that Royer in mid-October 2001 tapped into FBI databases to view reports detailing Elgindy's possible link to terrorism that were made shortly after the attacks. Among the reports viewed by Royer was one filed by Vicky Liviakis on Sept. 17, 2001. Vicky is the wife of John Liviakis, a stock promoter who had been a target of Elgindy in the past. David Ross, a broker at Salomon Smith Barney, also filed a report on Sept. 30, 2001, related to the timing of some of Elgindy's trading or intentions to trade. Matt Tyson, a former partner of Elgindy's who had a fallout with the short seller, also filed a report with the FBI.
Royer admitted in court that he spent time reviewing these reports. He said that he did not share any of that information with Elgindy.
Prosecutor Levine Wednesday afternoon introduced evidence showing that Royer made telephone calls to Derrick Cleveland, another trader charged in the case who pleaded guilty to conspiracy to commit securities fraud, shortly after searching FBI databases in October 2001. Logs of telephone conversations also show that Royer called Elgindy on Oct. 17 after he searched FBI databases about the terrorism investigation.
Royer testified that despite his review of the FBI case file, he didn't know that Elgindy was under investigation when he went to work for him in January 2002. According to earlier testimony, a Department of Justice official in charge of the FBI probe had told Royer that Elgindy was under investigation in November 2001. But Royer argued in court Wednesday that nothing he saw in the FBI file indicated that Elgindy was a target of the investigation.
After he left the FBI and moved to San Diego to work with Elgindy, Royer asked his then-girlfriend, FBI agent Lynn Wingate, to search the bureau's databases for him. Telephone logs in evidence show that Wingate and Royer were in communication before and after she searched Elgindy's, Royer's and her name in FBI databases.
After she searched FBI databases on April 18, 2002, Wingate called Royer and told him that he should distance himself from Elgindy. Wingate also is charged in the case. She pleaded not guilty and is scheduled to go on trial later this year.
Royer's cross-examination is scheduled to end Thursday. Closing arguments are scheduled to start Monday.
-By Carol S. Remond, Dow Jones Newswires; 201-938-2074 |
