Re: 12/20/04-1/14/05 - [ELGINDY] Carol Remond Reports from the Dow Jones Newswires
UPDATE:SEC Lawyer Testifies Agency Probing Elgindy In '01
12-20-04 10:00 PM EST
(Updates with additional testimony in seventh and eighth paragraphs.)
By Carol S. Remond
Of DOW JONES NEWSWIRES
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.
Also testifying for the defense Monday was SEC lawyer Roberto Tercero who told jurors that Elgindy contacted him with information about two companies. In one audio tape played for jurors, Elgindy and another short-seller named Steve Pluvia can be heard telling the SEC about a company called EConnect. Asked by Elgindy's lawyer Berke whether Elgindy contributed to a later SEC inquiry into the company, Tercero said that the information passed along by the short-seller was a starting point to consider whether or not to take a closer look at the company. Tercero stressed the SEC conducted its own investigation and only after that began an investigation into the company.
FBI special agent Michael Gaeta also testified for the defense Monday. Gaeta, an agent assigned to look into organized crimes, said he was contacted by Elgindy in 1996 with information about a company called Quigley. Gaeta said he signed up Elgindy as a confidential informant but that he released him just five days later because Elgindy wasn't a reliable informant. Earlier Monday, prosecutors and defense lawyers argued over whether to admit in evidence the fact that another FBI agent had told Gaeta that Elgindy was a liar.
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 2200ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
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UPDATE:Elgindy Defense Case Winds Down;More SEC Testimony
12-21-04 08:19 PM EST
(Updates with additional testimony.)
By Carol S. Remond
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Lawyers for short-seller Anthony Elgindy are winding down their presentation to jurors, spending most of Tuesday introducing charts and documents relating to companies whose stock Elgindy is accused of manipulating.
Elgindy and former Federal Bureau of Investigation 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. Evidence introduced in the case showed some of the confidential information that made its way onto the Web site mirrored word for word information contained in FBI documents.
Elgindy's lawyers over the last few weeks called several Securities and Exchange Commission lawyers and a few FBI agents to testify for the short- seller. The lawyers want to show that Elgindy was sharing information about companies he thought were scams with numerous law-enforcement officers and that he gleaned confidential information in the process.
Tuesday afternoon, Elgindy called Yuri Zelinsky, another SEC lawyer, in an attempt to try to impeach part of the testimony of John Sten, a former SEC lawyer. Sten was called by Elgindy's defense last week to testify about how Elgindy provided valuable information to the SEC during an 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. Zelinsky told jurors Tuesday that Elgindy was one of several market makers who agreed to fix the price of a security so that a third party could benefit, backing Sten's testimony that Elgindy was part of a scheme to defraud.
Elgindy is expected to rest his defense Wednesday. It's now unclear whether Royer's defense will start Wednesday or will be held until Monday Jan. 3 after the Christmas recess.
- By Carol S. Remond, Dow Jones Newswires; 201-938-2074
Dow Jones Newswires
12-21-04 2019ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
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Elgindy Closes Defense; More Documents Introduced
12-22-04 01:59 PM EST
NEW YORK (Dow Jones)--Online stock guru Anthony Elgindy concluded his defense Wednesday. Former Federal Bureau of Investigation special agent Jeffrey Royer is now scheduled to testify in his own defense Jan. 3 after the holiday recess.
Elgindy and Royer are 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 Elgindy used a private investing Web site to share confidential information he obtained from Royer. Evidence introduced indicates some of the confidential information that made its way onto the site mirrored word for word information contained in FBI documents. A lawyer for Elgindy spent Wednesday morning reading online postings from the short seller's private Web site to put them on the record.
A few procedural matters will need to be addressed after the recess. One former FBI agent who already testified for the prosecution will be called to testify by Elgindy.
In almost two weeks of witness presentations, Elgindy tried to show jurors that he had numerous contacts with law enforcement officers and that he was able to glean confidential information in the process. Elgindy did not testify in his defense.
Federal Judge Raymond Dearie told jurors Wednesday that he expects the presentation of evidence in the case will be concluded in the first week of January. After that, lawyers for the two defendants and the prosecution will make closing arguments.
-By Carol S. Remond, Dow Jones Newswires; 201-938-2074
Dow Jones Newswires
12-22-04 1359ET
Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.
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UPDATE: Ex-FBI Agent Continues Testimony In Elgindy Trial
01-03-05 08:29 PM EST
(Updates with additional testimony, beginning in the fifth paragraph from the bottom of the story.)
By Carol S. Remond
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Former Federal Bureau of Investigation Special Agent Jeffrey Royer testified Monday that he had a typical agent-informant relationship with Anthony Elgindy and Derrick Cleveland, and that his goal was to gather information about stock fraud.
Royer told jurors that Cleveland and Elgindy were viable informants who " offered a very unique approach to information-gathering."
Royer and Elgindy 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 several counts of 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. Cleveland, who also was charged in the case, pleaded guilty to conspiracy to commit securities fraud and is cooperating with the government.
The case resumed Monday after a 10-day holiday recess. Closing arguments are now scheduled to begin next week, and the case should go to jurors in the week of Jan. 18.
Elgindy showed up in court Monday morning with a large bandage around his head, following an altercation with another inmate at the Metropolitan Detention Center, where he has been detained since April 2004 following his arrest after he tried to board a plane with fake identification.
Cleveland testified for the government that he had an agreement with Royer to share 50-50 any trading profit generated from confidential information he received from the agent. But Royer in court Monday told jurors that he never had any conversation with Cleveland about trading on information he shared with him. Royer said that he was very interested in the market and trading, and that he saw Cleveland, who at one time was an FBI informant for the agent, as a valuable source of information.
Royer told jurors that his desire to quash securities fraud was fueled by his own losses in a company called Webtel. Royer said he invested about $82,000 of his own and his friends' and family's money, which was lost when the company blew up.
Royer said he asked Cleveland to invest some short-term money that he got from a settlement of his Webtel losses and that Cleveland returned the same exact amount, $15,000, a few weeks later when the agent asked him for it.
Royer said he contracted Cleveland as an FBI informant to assist in an investigation into a fraudulent company called Broadband Wireless International Corp., which traded under the ticker symbol BBAN. Royer said that at one time he was himself an investor in Broadband Wireless but that he sold the stock when he realized the company's president, Don Knight, was under investigation.
The former FBI agent said he was putting together in 2000 a proposal for a government task force that would have included the use of undercover informants to detect securities fraud. Royer said he wanted to recruit Cleveland and Elgindy for the job. Royer said his proposal mirrored an undercover investigation out of the Newark, N.J., FBI office. Royer said he had contact with the agent in charge there and was putting together a similar proposal.
Royer said he took some documents related to the Newark securities fraud investigation to San Diego in February 2001 when he went to visit Elgindy to recruit him. These documents included confidential files obtained from the FBI database, some of which were seized form Elgindy's office at the time of his arrest.
Royer said he continued working on putting together his task force proposal after he was taken off the Broadband Wireless investigation in Oklahoma City and transferred to the Gallup, N.M., FBI office.
"It needed to be done. There was no limit to how much (Elgindy and other members of his investing Web site) could help," Royer said.
Asked by his lawyer why he provided detailed information about an ongoing Securities and Exchange Commission investigation into a scam company called SeaView, Royer explained that it is standard procedure for FBI agents working with undercover informants.
"I told Derrick about the SEC information so that they knew exactly what they had to do. You give; you get back. The more focused (information) you give, the more focused (information) you get back," Royer testified.
Royer said he started contemplating leaving the FBI in April 2001 because of his desire to move to Denver to be close to his children. He said that at that time he began talking to Elgindy about his plan to hire a private investigator to help uncover stock fraud.
Royer said that he discussed his financial woes with Elgindy but that the short seller never offered to lend him money.
The former agent said he wanted to testify in his defense because he wants to make things right. Royer said FBI agents told him after his arrest in 2002 that he was a dirty agent and that he had accepted $30,000 in bribes which originated from Elgindy. The government had first alleged that wire transfers totaling about $30,000 from Cleveland to Royer were payoffs. But the money turned out to be Royer's money and a loan from Cleveland for Royer to purchase a car. Royer had been repaying that loan to Cleveland before his arrest.
Under cross examination by assistant U.S. attorney Seth Levine, Royer agreed that he had provided non-public law enforcement information gathered from FBI databases or from SEC employees. But the former agent insisted he only did that in order to secure information in return from both traders.
"In the real world, that's what you do to get information. That's how it works," Royer told Levine.
Royer's testimony and cross examination drew quite a crowd Monday with several FBI agents and other curious people in attendance in the Brooklyn courtroom.
Royer's cross examination is expected to continue Tuesday.
-By Carol S. Remond, Dow Jones Newswires; 201-938-2074; carol.remond@ dowjones.com
Dow Jones Newswires
01-03-05 2029ET
Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.
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=====
Royer's Trading In BBAN Scrutinized In Elgindy Trial
01-04-05 11:45 PM EST
NEW YORK (Dow Jones)--A former FBI special agent on trial for market manipulation in Brooklyn invested in the stock of a company even after he was informed that one of its insiders was dirty, a federal prosecutor alleged in court Tuesday.
Documents introduced into evidence in the federal securities case against Anthony Elgindy and former Federal Bureau of Investigation agent Jeffrey Royer show that Royer bought shares of Broadband Wireless International Corp (BBAN) in January 2000, months after another FBI agent told him that Don Knight, a man who controlled much of Broadband Wireless and its stock, was likely involved in criminal activities.
Royer said in court that he didn't know at the time of his investment that Knight was involved with Broadband Wireless. But his testimony came under attack by Assistant U.S. attorney Seth Levine Tuesday.
Royer and Elgindy are standing trial in U.S. District Court for the Eastern District of New York. They and others were charged in May 2002 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. The government also claims that Elgindy and others used some of that information to extort discounted shares from at least two companies.
Testifying for his own defense, the former agent said in court this week that he sold his shares of Broadband Wireless as soon as he became aware of the involvement of Don Knight, a man he was investigating for insurance fraud. Royer later that year worked on an FBI probe into Knight and Broadband Wireless at Oklahoma City FBI office. He was removed from the investigation in late August when a federal prosecutor became aware of his previous involvement in the stock.
Under cross-examination by Levine, Royer testified that he first realized that Knight was involved with Broadband Wireless in late February or early March 2000. Royer said he first got audio tapes from an FBI agent in Newark, Jim McGuigan, in the Summer of 2000. The tapes related to an undercover securities and mob case run by the Newark FBI office and indicated that Knight may be involved in criminal activities.
But under tough questioning by Levine, Royer admitted that he first talked to McGuigan in the summer of 1999, not 2000. Levine introduced into evidence FBI documents showing that Royer received the Knight audiotapes in September 1999, not the summer of 2000, as Royer had first claimed.
Knight disappeared in late August 2000 after the Securities and Exchange Commission and the Oklahoma State Securities Department filed lawsuits alleging that he and Broadband Wireless' president, Ivan Webb, defrauded investors by releasing untrue Internet postings to artificially drive up Broadband stock 10, 000%, from pennies to more than $12 a share. In September 2004, the SEC permanently enjoined Knight from further violating securities law. Knight remains a fugitive and according to the SEC currently resides in Alajuela, Costa Rica.
Royer told jurors Tuesday that he was investigating Knight for insurance fraud but that he didn't know that Knight was involved with Broadband Wireless, or its predecessor company, Broadcom Wireless Communications Corporation, before late February or early March 2000.
But a financial report filed by Broadband Wireless in July 2000 with the SEC shows that from July to November 1999, Broadband was negotiating with Knight, who wanted to acquire a shell company to reverse merge assets into it. Both parties signed a memorandum of understanding in November 1999. According to the filing, Broadcom, a company controlled by Knight, owned about 64% of Broadband Wireless stock and exerted control over the company until May 2000.
None of this information was public in early 2000 when the former FBI agent invested in Broadband Wireless.
But prosecutor Levine was clearly dubious of Royer's claim of ignorance, given the former agent's investigation of Knight for insurance fraud and the fact that he had received information indicating that Knight might be involved in criminal activity.
"When you traded in BBAN, you knew that Don Knight was involved, right," Levine asked Royer. "Absolutely not, there was no link between BBAN and Don Knight until February or March 2000 when I sold my stock," Royer answered.
After first telling jurors that he sold his investment in Broadband Wireless as soon as he became aware of Knight's involvement, Royer admitted, under questioning by prosecutor Levine, that he sold his shares in the company in three installments to maximize his profits.
"You sold based on the price of the stock?" Levine asked to Royer who answered, "Yes."
Evidence introduced in court shows that Royer made about $12,000 on his investment in Broadband Wireless. The former agent sold his stock on two separate occasions in February 2000 and on March 3, 2000.
Royer's cross-examination is scheduled to resume Wednesday.
-By Carol S. Remond, Dow Jones Newswires, 201 938 2074, carol.remond@ dowjones.com
Dow Jones Newswires
01-04-05 2345ET
Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.
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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 Aarow Environmental 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
Corrected January 6, 200413:40 ET (18:40 GMT)
Dow Jones Newswires
01-05-05 1748ET
Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.
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Government Begins Closing Argument In Elgindy Case(DJ)
01-11-05 02:31 PM EST
NEW YORK (Dow Jones)--Short seller Anthony Elgindy and former Federal Bureau of Investigation special agent Jeffrey Royer were opportunistic thieves who wanted to profit from using nonpublic information, a federal prosecutor told a Brooklyn jury Tuesday.
"This case is about fraud, corruption and betrayal," Assistant U.S. Attorney Seth Levine said at the beginning of his closing statement.
Elgindy and Royer were charged in May 2002 in a racketeering indictment with securities fraud, market manipulation, extortion and obstruction of justice. They were charged in the U.S. District Court for the Eastern District of New York.
Levine told jurors that the government's evidence in the case is overwhelming.
"These two men were engaged in a thoroughly corrupt relationship predicated on theft. They weren't trying to help out," Levine told jurors.
During the 10-week trial, the government alleged that Royer shared confidential information he lifted from FBI computers with Elgindy, who then used his Web site to release the information in a way to artificially affect the stock prices of companies.
Elgindy's lawyers have argued in court that he was a crusader trying to eradicate market fraud. Royer also has claimed in his own defense that he was only sharing confidential information with Elgindy and others as a tool to learn more details about securities fraud.
But prosecutor Levine expressed a very different view during his closing argument.
"There was no crusade here. They weren't heroes being called on the 'bat- phone' because the commissioner couldn't handle a crime. They were mercenaries," Levine told jurors.
According to Levine, Elgindy's and Royer's motive is clear: "It's greed. It's that simple," Levine said, explaining that Royer was facing mounting debt in 2000 and 2001. Evidence introduced in court showed that the former FBI agent spent most of 2001 sharing information with Elgindy and others while he was negotiating a job with the San Diego short seller.
Levine is expected to conclude his closing argument after the lunch recess Tuesday. Royer's defense lawyer, Lawrence Gerzog, will present his closing argument to jurors Wednesday morning. He will be followed by Elgindy's lawyers, Barry Berke and Joel Isaacson.
- By Carol S. Remond, Dow Jones Newswires; 201-938-2074
Dow Jones Newswires
01-11-05 1431ET
Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.
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UPDATE: Elgindy Defense, Govt End Closing Arguments
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Royer's Defense Lawyer Says Govt Didn't Prove Its Case
01-12-05 02:44 PM EST
NEW YORK (Dow Jones)--Former federal agent Jeffrey Royer shouldn't be found guilty of the charges of securities fraud, racketeering, extortion and witness tampering he is charged with, his lawyer told jurors Wednesday.
"Where is the evidence that Jeffrey Royer agreed with anybody to extort anyone? Where's the proof that he aided and abetted anyone?," Lawrence Gerzog said in his closing statement.
Royer and short seller Anthony Elgindy are standing trial in a Brooklyn courtroom. The government alleges that they used confidential information stolen by Royer from Federal Bureau of Investigation databases to manipulate the shares of companies and, on two occasions, to extort discounted shares from them. The two are also accused of obstructing a government investigation into suspicious trading prior to the Sept. 11 terrorist attacks on the U.S. The current racketeering and fraud charges evolve from that 9/11 investigation. Both men have pleaded not guilty.
Testifying for his own defense earlier this month, Royer told jurors that he shared confidential information with Elgindy and others simply to gather more information from them. He said his goal was to eradicate securities fraud.
Gerzog admitted in his closing argument that his client may have broken FBI protocol when he shared detailed information with Elgindy. Some of that information ended up on Elgindy's private investing Web site where he shared it with others.
Gerzog accused the government of tarnishing his client's reputation by alleging that he sold his country out for a profit.
"If they want to accuse him of breaking FBI rules, then do it. If they want to charge him for having documents in his garage, then do it. Don't charge him with obstruction of justice," Gergoz told jurors.
Royer left the FBI in December 2001 and went to work for Elgindy in San Diego. FBI documents he downloaded from government databases were found in his girlfriend's garage, after his arrest. Some FBI documents were also seized at Elgindy's office. The girlfriend, Lynn Wingate, a former FBI agent, is also charged in the case but will be tried separately.
Gerzog attacked the credibility of the government's first witness in the case, a day trader named Derrick Cleveland. Cleveland was also charged in the case in May 2002 and pleaded guilty to conspiracy to commit securities fraud and is cooperating with the government.
Cleveland testified he had a deal with Royer to share 50-50 any trading profits generated from information he obtained from the former agent. Cleveland said in court that he never actually gave Royer any money because he never made any profit.
"Derrick Cleveland lied when he said he made no money to give Jeffrey Royer. He lied when he said there was a 50-50 agreement," Gerzog told jurors after presenting them with a chart, which he said showed Cleveland made about $50,000 in trading profits.
Gerzog asked jurors to find Royer not guilty of all charges because he said the government failed to prove its case beyond a reasonable doubt.
Barry Berke, a lawyer for Elgindy, will begin his closing statement after the lunch recess.
-By Carol S. Remond, Dow Jones Newswires; 201-938-2074
Dow Jones Newswires
01-12-05 1444ET
Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.
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Elgindy Defense Continues Closing Argument In Brooklyn
01-13-05 02:20 PM EST
NEW YORK (Dow Jones)--Defense lawyer Barry Berke told jurors Thursday the U.S. government has not proved its case against short-seller Anthony Elgindy "by a long shot."
Elgindy is accused of conspiring with former Federal Bureau of Investigation agent Jeffrey Royer to manipulate the shares of small companies. Elgindy and Royer were charged in the U.S. District Court for the Eastern District of New York in a racketeering indictment in May 2002. The government alleges that Royer pilfered secret information from FBI computers and shared it with Elgindy and others who used it to manipulate the stocks of small companies and, on two occasions, to extort discounted shares from them.
In the second day of his closing argument, Berke told jurors that Elgindy often was able to gain information when he shared details about stock fraud with securities regulators. "There is nothing illegal about that," he said. "Federal agents, (Securities and Exchange Commission) lawyers and cops are human beings. Some people are going to be chattier than others. They have different styles.
"He's telling them things, and they're telling him things."
Joel Isaacson, another lawyer for Elgindy, is expected to present a portion of the closing argument after the lunch recess. Berke is expected to conclude Elgindy's closing argument after that.
-By Carol S. Remond, Dow Jones Newswires; 201-938-2074
Dow Jones Newswires
01-13-05 1420ET
Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.
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UPDATE: Elgindy Defense, Govt End Closing Arguments(DJ)
01-14-05 04:55 PM EST
(Adds prosecutor's argument)
By Carol S. Remond
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Anthony Elgindy's defense team ended its closing arguments Friday in a federal courtroom.
Closing his three-day presentation in Brooklyn, N.Y., Barry Burke, a lawyer for Elgindy, called on jurors to find his client not guilty on all counts.
Elgindy is charged with having conspired with former FBI Special Agent Jeffrey Royer to manipulate shares of small companies. The two men were charged in a 33- count racketeering indictment with securities fraud, market manipulation, extortion and obstruction of justice.
Burke told jurors the U.S. government hasn't met its burden of proof. He said the prosecution's first witness, Derrick Cleveland, is a liar who can't be trusted. Cleveland was charged in the case and pleaded guilty to conspiracy to commit securities fraud and is cooperating with the government.
Prosecutors "have been prepared to take Derrick Cleveland's lies hook, line and sinker. They have been snookered," Burke told jurors.
"Mr. Elgindy did not believe that what he was doing was illegal. Mr. Elgindy did not believe that Royer was corrupt," Burke said.
The government alleged during a 10-week trial in the U.S. District Court for the Eastern District of New York that Royer stole information from FBI computers, which he shared with Elgindy and others, who colluded to manipulate the stock of companies they targeted. The government also alleged that Elgindy and Royer used the information to extort discounted shares from two companies.
Elgindy and Royer are also accused with having obstructed a post-Sept. 11 investigation into suspicious trading that took place before the terrorist attacks on the U.S. That investigation was the genesis of the current charges.
Closing the government's case against Elgindy and Royer, a prosecutor said the government had overwhelming evidence against the two men.
Assistant U.S. Attorney Kenneth Breen said the government had proved that Royer was corrupt and that Elgindy knew that he was.
Breen said the defendants' explanation that they shared information for law- enforcement purposes was "a made-up rational to hide their true financial motive."
Answering the defense's claim that Elgindy and Royer wouldn't have been so public about their dealings if they were engaged in a corrupt relationship, Breen said a certain amount of "necessary risk" was needed for them to achieve their goal.
The prosecutor pointed out to jurors that Elgindy lied about whether he ever received confidential law-enforcement information from anybody in the government during his post-arrest interview.
"If you thought that what you were doing was not wrong, why lie?" Breen asked jurors.
Breen also told jurors that the government's obstruction case was strong. Breen said Elgindy knew things, including the fact that donations to Middle Eastern charities were part of the 911 investigation, that he wouldn't have known unless Royer told him about the probe.
Evidence introduced in the case shows that Elgindy volunteered during his post-arrest interview that he never gave money to Middle Eastern charities.
Breen said the defense's contention that arranged stock transactions with two companies were typical block trades is absurd.
"This is not a Wall Street deal...I submit to you that this is just a shakedown, an extortion of stock."
Breen concluded his rebuttal by asking jurors to return the only verdict supported by the evidence in the case and common sense. "That is a verdict of guilty on all counts," he said.
Federal Judge Raymond Dearie will instruct jurors Tuesday, after which they will begin deliberations.
-By Carol S. Remond, Dow Jones Newswires; 201-938-2074; carol.remond@ dowjones.com
Dow Jones Newswires
01-14-05 1655ET
Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.
news.morningstar.com
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