Re: 1/3-1/15/05 - [ELGINDY] NY Times and AP Reports
FBI agent defends conduct in insider trading case
By MICHAEL WEISSENSTEIN
Associated Press Writer
January 3, 2005, 7:19 PM EST
NEW YORK -- A former FBI agent admitted Monday that he gave online stock traders confidential details of federal investigations, including a probe of the Sept. 11 terror attacks.
One of the recipients was San Diego penny stock picker Anthony Elgindy. Elgindy was investigated by a Justice Department task force examining whether anyone might have known of the terrorists' plans and profited by selling vulnerable stocks just before the attacks, Royer said.
Elgindy was not charged in connection with that probe, but an investigation into the ties between Elgindy and Royer led to racketeering, securities fraud and other charges against the two men. They are on trial together in federal court in Brooklyn.
Taking the stand in his defense, Royer acknowledged Monday that he revealed the existence of FBI and SEC investigations, executives' criminal records and other sensitive information to Elgindy and associate Derrick Cleveland.
He said the apparent violations were justified because Elgindy and Cleveland were stock-market experts who helped him develop evidence of financial wrongdoing.
Prosecutors say the relationship was criminal. Elgindy was accused of paying Royer for the information and using it to manipulate stock prices and extort companies that were the subjects of investigations.
When pressed by Assistant U.S. Attorney Seth Levine about apparent violations of FBI rules, Royer grew testy, asserting that he was an independent-minded agent who had the right to decide what information to reveal.
"It's real easy for you to armchair quarterback when you don't have anything to do with the case," Royer told Levine. "Pursuant to a law-enforcement purpose, I can do anything I want with the files."
Elgindy, his head wrapped in a white bandage, watched as Royer described their relationship from the stand. Lawyers said Elgindy had been assaulted at the Metropolitan Detention Center in Brooklyn, where he is being held during the trial. A jail spokesman said he could not provide information about the incident.
Cleveland has pleaded guilty to conspiracy to commit securities fraud and testified against Elgindy and Royer.
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Copyright © 2005, The Associated Press
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Ex-F.B.I. Agent Defends Role in Fraud Case
By ERIC DASH
Published: January 4, 2005
For nearly two months, Jeffrey A. Royer, a former F.B.I. agent, has sat silent as prosecutors accused him of providing confidential government information to a controversial stock adviser as part of an elaborate scheme. But yesterday, taking the witness stand for the first time, Mr. Royer testified that the adviser, Anthony Elgindy, was simply "a very valuable source."
Both Mr. Royer and Mr. Elgindy are accused of securities fraud, market manipulation and extortion in a conspiracy trial that is in its eighth week in the Federal District Court in Brooklyn.
In a spirited cross-examination yesterday afternoon, Mr. Royer admitted that between March 2000 and May 2002, he gave Mr. Elgindy information about confidential government investigations. But Mr. Royer maintained that he did so for law enforcement purposes and never expected anything but information in return.
The government contends that Mr. Royer supplied Mr. Elgindy with advanced news of criminal investigations into several small companies, which Mr. Elgindy published on two Web sites he operated, in a short-selling scheme that allowed both men to profit. Prosecutors also say that Mr. Elgindy used the confidential information to extort heavily discounted and sometimes free stock from companies that feared the impact of such a disclosure.
"I was interested in getting information back," said Mr. Royer, who was soft-spoken at first but grew more feisty as prosecutors continued with their cross-examination. He said he had no idea that Mr. Elgindy would use the information to sell stocks short, which involves borrowing shares in the hope that their price will fall.
Mr. Royer said that he thought that Mr. Elgindy's network of contacts in the investment world could provide the F.B.I. with useful information, and that he showed Mr. Elgindy some confidential e-mail messages and other documents related to companies under investigation as a way of winning trust.
Through his Internet investing site, Mr. Elgindy and others "offered a unique approach to information-gathering," Mr. Royer later added. "Mr. Elgindy was an individual, a conduit to 300 people who researched stock fraud.
"By sharing information, I would allow law enforcement and regulatory authorities to shut down companies that scammed the general public. That is what I planned to do."
Three other associates of Mr. Elgindy are expected to stand trial sometime this year on separate charges related to the case.
Mr. Elgindy, who is not scheduled to testify, has been in jail since April 2004, after he boarded a plane with false identification while awaiting trial in the securities fraud case.
Mr. Elgindy, a controversial figure in the world of cheap and thinly traded shares, has been portrayed by prosecutors as the mastermind of a complicated scheme. He appeared yesterday in a dark suit, with a bloodied bandage wrapped tightly around his head - caused by a "mishap" in prison, his lawyer, Joel R. Isaacson, said.
But it is the supporting role of Mr. Royer that has provided the government with the basic foundation of its case.
Even though Mr. Royer said he was aware that Mr. Elgindy was a well-known short seller, he said that he did not know what Mr. Elgindy planned to do with the confidential information. Mr. Royer acknowledged that he used a case code for an A.T.M. theft in New Mexico when he searched a secure government database for information related to individuals at several companies that interested Mr. Elgindy. Mr. Royer also said that he took home confidential government reports after he left the F.B.I., apparently in violation of the agency's rules.
On cross-examination, Seth Levine, an assistant United States attorney, asked him: "Is it your prerogative that you could send confidential information to a convicted felon whenever you want?" Mr. Royer said that it was not.
"It's real easy for you to armchair-quarterback when you don't have anything to do with the case," Mr. Royer later said. "Pursuant to law enforcement purposes, I can do anything I want with the files."
Mr. Royer also said that after the 9/11 attacks, he learned that Mr. Elgindy was being investigated by the Justice Department for potential terrorist ties. He said that he did not inform Mr. Elgindy because he did not want to interfere with the investigation.
It was not the first time that Sept. 11 had been invoked in this case. Earlier in the trial, the fact that Mr. Elgindy was a subject of a terrorism-related investigation shortly after 9/11 was introduced into evidence. Mr. Elgindy's lawyers have argued that there is no reason to suggest that their client was connected to terrorism. And yesterday, as before, Judge Raymond J. Dearie instructed jurors to keep in mind that this case has nothing to do with terrorism.
For the first five weeks of the trial, prosecutors called on several F.B.I. agents who worked with Mr. Royer, along with former businesses associates of Mr. Elgindy, some of whom have pleaded guilty as part of a deal with the government. Mr. Royer's testimony seemed to affirm many of the events, but offered an alternative explanation that appeared to be fairly consistent with Mr. Elgindy's defense case, delivered last month.
Mr. Elgindy's lawyers have maintained that their client worked with Mr. Royer in an effort to crack down on stock frauds and that he sometimes gained confidential information in the process.
Derrick Cleveland, a stock trader who introduced Mr. Royer to Mr. Elgindy, pleaded guilty to securities fraud conspiracy, and agreed to testify for the government in the case. In his 10 days of testimony, he outlined case after case in which he claimed that Mr. Royer provided important tips that he and Mr. Elgindy used to sell stocks short. In yesterday's testimony, Mr. Royer said that the information he provided was far more limited.
F.B.I agents testifying for the government have said that Mr. Royer freely admitted to gaining access to password-protected government databases to furnish confidential S.E.C. and F.B.I. information.
They also said that Mr. Royer told them he planned to work for Mr. Elgindy and other short sellers after he left the agency in December 2001. The agents also said that Mr. Royer told them at the time that he was interested in exposing corporate fraud because he had once lost a large investment in a bogus company. Mr. Royer's testimony yesterday appeared to affirm these remarks.
Closing arguments are in the case are expected to take place as early as next week.
nytimes.com
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TRIAL'S 9/11 TWIST
By KATI CORNELL SMITH
January 4, 2005 -- A former FBI agent, defending himself against charges he stole law-enforcement information to commit stock fraud, tried to turn the tables yesterday with a wild claim he could have prevented 9/11 if he was allowed do his job.
Jeffrey Royer testified that early in 2001, his supervisors overreacted to a problem with an informant, and shut down a probe of a smuggling ring with ties to Hamas that had exploited security weaknesses on an Indian reservation bordering Canada.
"I shelved it. C'est la vie," Royer, who retired from the FBI on Dec. 25, 2001, said flippantly.
"Then 9/11 happened."
The ex-agent told his lawyer, Lawrence Gerzog, that "the bureau had messed up" by taking the heat off a corrupt Customs official who could have helped terrorists enter the United States.
Royer made the bizarre assertion as he denied charges that he helped stock guru Anthony "Pacific" Elgindy manipulate the market.
Royer and Elgindy are co-defendants in the Brooklyn federal court trial.
Royer claimed Elgindy needed confidential information to perform his work as an FBI informant — and credited him with launching several important probes, including one of suspicious stock trades on Sept. 10, 2001.
But during cross-examination, Royer admitted other agents had told him Elgindy was actually a suspect in the terror probe — and that he still leaked protected FBI information to a close associate of the stock genius.
Elgindy is on trial for using information about investigations into various companies to commit stock fraud and extortion — but has not been charged with any terror-related crime. Asked by Assistant U.S. Attorney Seth Levine if he knew he was violating his official oath by dispensing confidential law-enforcement information without permission, Royer said he was not in "junior high" and enjoyed "autonomy" as an agent.
"I told them I would protect and serve the Constitution of the United States," Royer said bluntly.
"I didn't say I would follow the rules of the FBI."
nypost.com
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Ex-FBI agent admits giving data to traders
By Michael Weissenstein, Associated Press Writer | January 4, 2005
NEW YORK -- A former FBI agent admitted that he gave online stock traders confidential details of federal investigations, including a probe of the Sept. 11 terror attacks.
One of the recipients was San Diego penny stock picker Anthony Elgindy. Elgindy was investigated by a Justice Department task force examining whether anyone might have known of the terrorists' plans and profited by selling vulnerable stocks just before the attacks, Jeffrey Royer said.
Elgindy was not charged in connection with that probe, but an investigation into the ties between Elgindy and Royer led to racketeering, securities fraud and other charges against the two men. They are on trial together in federal court in Brooklyn.
Taking the stand in his defense, Royer acknowledged Monday that he revealed the existence of FBI and SEC investigations, executives' criminal records and other sensitive information to Elgindy and associate Derrick Cleveland.
He said the apparent violations were justified because Elgindy and Cleveland were stock-market experts who helped him develop evidence of financial wrongdoing.
Prosecutors say the relationship was criminal. Elgindy was accused of paying Royer for the information and using it to manipulate stock prices and extort companies that were the subjects of investigations.
When pressed by Assistant U.S. Attorney Seth Levine about apparent violations of FBI rules, Royer grew testy, asserting that he was an independent-minded agent who had the right to decide what information to reveal.
"It's real easy for you to armchair quarterback when you don't have anything to do with the case," Royer told Levine. "Pursuant to a law-enforcement purpose, I can do anything I want with the files."
Cleveland has pleaded guilty to conspiracy to commit securities fraud and testified against Elgindy and Royer.
© Copyright 2005 Associated Press. All rights reserved.
boston.com
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Corrupt agent betrayed public trust, prosecutor says in closing argument
By MICHAEL WEISSENSTEIN
Associated Press Writer
January 11, 2005, 3:06 PM EST
NEW YORK -- A corrupt FBI agent betrayed the public by feeding confidential information to inside traders who used it to manipulate penny stocks, a federal prosecutor said Tuesday.
Jeffrey Royer said he gave government files to San Diego stock picker Anthony Elgindy because he wanted Elgindy's help probing fraudulent firms, the prosecutor said in his closing argument.
In fact, argued Assistant U.S. Attorney Seth Levine, Royer thought the trader and his associates would help him pay off tens of thousands of dollars in personal debt.
Royer and Elgindy are on trial in Brooklyn federal court on charges of racketeering and stock fraud.
"Royer used his position of trust _ his position of trust in the FBI _ to betray not only the FBI itself, and the other federal and state agencies with whom the FBI works, but the public," Levine said.
Levine said dozens of witnesses and transcripts of Internet chat-room conversations offered during the five-week trial proved that Royer mined government computers for information, such as executives' criminal records, that Elgindy used to extort firms or manipulate their stock prices.
Elgindy ran a Web site for traders engaged in short-selling, or betting against the stocks, of low-value companies.
Royer even tipped off the Egyptian-born financial analyst to an FBI probe into whether he profited from advance knowledge of the Sept. 11, 2001, terror attacks by selling off stocks that plunged after the attacks.
Charges were never filed in the Sept. 11-related Elgindy probe. U.S. District Judge Raymond J. Dearie has repeatedly instructed jurors that the racketeering and stock fraud charges have no relation to terrorism.
Royer, who chewed gum and smirked as Levine talked, testified during the trial that he felt he needed no official authorization to give out FBI information because he was trying to develop information about financial fraud.
At the time, Royer was an agent in the Gallup, N.M., office investigating mostly crimes on Indian tribal land. He planned to leave the FBI and work as a private investigator for Elgindy and other traders.
"It just can't be that FBI agents who have badges and guns go running around the country doing whatever they want," Levine said.
Lawyers for Royer and Elgindy are expected to deliver their closing arguments Wednesday.
Copyright © 2005, The Associated Press
nynewsday.com
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Prosecution Talks of Greed at Fraud Trial
By ERIC DASH
Published: January 12, 2005
The prosecution's closing argument yesterday in the securities fraud trial of Anthony Elgindy and Jeffrey A. Royer focused on the questions posed at the start: Were Mr. Elgindy, a controversial Internet stock guru, and Mr. Royer, a former F.B.I. agent, crime-fighting crusaders for integrity in the marketplace? Or were they crusaders for personal gain?
Seth Levine, an assistant United States attorney, left little doubt about where the government stood. "There was no crusade here," Mr. Levine told the jury. "They were not crime-fighting heroes. They weren't called on the Batphone because the commissioner couldn't handle the crime. They were mercenaries."
The conduct of Mr. Elgindy and Mr. Royer is at the center of the high-profile penny-stock fraud case, which has lasted nearly nine weeks in Federal District Court in Brooklyn. Prosecutors contend Mr. Royer provided Mr. Elgindy and his business associates with confidential information about criminal investigations of companies. They in turn are accused of using it to profit by selling the companies' stocks short, betting that they would decline.
The defendants acknowledge that they made money, but they maintain they were more interested in exposing corporate fraud.
Both men face charges of securities fraud, conspiracy, market manipulation and extortion, as well as separate counts of obstruction of justice for interfering with the case. Mr. Royer is accused of witness tampering as well.
Lawyers for each defendant will present closing arguments tomorrow, but prosecutors made it clear yesterday that they felt there was little to dispute.
"That man, who sought to portray himself as a crusader in the market, was a thoroughly dishonest opportunist," Mr. Levine said early in his statement, pointing at Mr. Elgindy. He used almost the same words as he motioned toward Mr. Royer, saying he misappropriated the tools of justice and deceived the public from his position of trust.
"He wasn't working for the F.B.I.," Mr. Levine said several times during his presentation. "He's working for Elgindy."
Both men, Mr. Levine argued, were motivated by greed. Mr. Royer, who was more than $75,000 in debt, was lured by the potential of a lucrative job and the riches of trading, the government said. And Mr. Elgindy wanted to make easy money manipulating the market, eventually reaping thousands of dollars from trading and at least $2.5 million from subscribers to his investment Web sites.
Mr. Levine spent most of the morning pointing out examples of Mr. Royer's "fundamental dishonesty" when he testified last week in his own defense. Mr. Levine argued that there was a clear "information pipeline" between Mr. Royer and Mr. Elgindy. "Sources are supposed to provide information to the bureau," Mr. Levine said, challenging the former F.B.I agent's testimony that he was simply cultivating a valuable source. "It's not a two-way street."
But he used the bulk of the afternoon to direct the jury's attention to Mr. Elgindy. Mr. Levine accused him of using his Web sites "to release information in a controlled way" and manipulate the price of several thinly traded stocks, often at the expense of his own subscribers. He also played audiotapes to suggest how Mr. Elgindy used the government information to extort stock at deep discounts from some companies.
Mr. Elgindy, who was born in Egypt, came to the government's attention when investigators were looking for people with potential ties to terrorism after the attacks of Sept. 11, 2001, but his lawyers have said there is no evidence to connect him with terrorism. Judge Raymond Dearie severely restricted discussion of that investigation during witness testimony.
But in its closing arguments the government made reference to that inquiry. At issue, Mr. Levine said, is whether Mr. Royer and Mr. Elgindy tried to obstruct an investigation into terrorism ties before it evolved into a more general investigation into securities fraud.
Barry Berke, a lawyer for Mr. Elgindy, called the references to the terrorist investigations "improper and unnecessarily inflammatory" in one of several objections after the prosecution's argument. The government argued it took "special caution" when addressing the jury, and Judge Dearie denied the motions.
nytimes.com
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Defense: U.S. failed to prove FBI agent leaked secrets for money
January 12, 2005, 3:01 PM EST
NEW YORK (AP) _ Former FBI agent Jeffrey Royer may have broken internal rules by giving government files to stock traders, but prosecutors failed to prove he was part of a criminal conspiracy motivated by greed, Royer's lawyer argued Wednesday.
Royer gave information on federal investigations to traders Derrick Cleveland and Anthony Elgindy because he needed their help proving financial fraud, attorney Lawrence Gerzog said in federal court in Brooklyn.
"In the real world, when you're talking to sources of information, you give a little and you get a little and that's the way it works," Gerzog said in his closing argument at Elgindy and Royer's trial on racketeering, stock fraud and other charges.
Prosecutors alleged that Royer gave Cleveland and Elgindy negative information that the traders used to drive down the prices of stocks they held.
Cleveland testified that he and Royer agreed to split the profits from the short selling.
Gerzog said Wednesday that Cleveland's testimony was unbelievable and the government did not prove that Royer profited from giving away the FBI files.
Copyright © 2005, The Associated Press
nynewsday.com
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Defense in Fraud Case Asserts Clients' Intentions Were Good
By ERIC DASH
Published: January 13, 2005
In separate closing arguments yesterday, lawyers for Anthony Elgindy and Jeffrey A. Royer tried to chip away at prosecutors' accusations that the two men worked together in an elaborate securities fraud.
Mr. Elgindy, a controversial stock adviser, and Mr. Royer, a former F.B.I. agent, are at the center of a complex fraud case that has played out in Federal District Court in Brooklyn over the last nine weeks. Mr. Royer is accused of providing Mr. Elgindy and his associates with confidential information about investigations of companies, and Mr. Elgindy is charged with using that information to profit when those companies' stocks fell.
Barry Berke, a lawyer for Mr. Elgindy, told the jury that the government had taken his client's statements and actions out of context, turning well-intentioned acts of cooperation with law enforcement into criminal behavior.
Mr. Berke told the jury that the issue it must consider was Mr. Elgindy's intent, "whether he intended to commit a crime, whether he believed he was committing a crime." While Mr. Elgindy may have made some money, the lawyer said, he operated his investing Web site so that traders could exchange information, and his connections with law enforcement officials like Mr. Royer helped expose corporate frauds.
Lawrence Gerzog, Mr. Royer's lawyer, acknowledged that his client shared confidential government information with Mr. Elgindy and his business associates. But he, too, maintained that it was part of an effort to expose corporate crimes.
Mr. Gerzog suggested that his client was a "commando" in the "war against scammers" who sometimes gave out confidential information to gain more.
"If every F.B.I. agent did what Mr. Royer did, it would be chaos," Mr. Gerzog said. "But Jeffrey Royer is not charged with breaking the F.B.I.'s rules. He's charged with committing fraud."
Both men face charges of securities fraud, conspiracy, market manipulation and extortion, as well as separate counts of obstruction of justice for interfering with the case. Mr. Royer also faces a separate witness- tampering charge.
While the prosecution is trying Mr. Elgindy and Mr. Royer at the same time, the back-to-back closing arguments from the defense yesterday emphasized that the jurors consider the charges against the men separately. Still, the intent and motivation of the defendants remains the central issue in the case.
In the morning session, Mr. Gerzog said Mr. Royer provided information but neither expected nor received anything in return.
Directly contradicting the prosecution, Mr. Gerzog denied that Mr. Royer had an agreement with one of Mr. Elgindy's business associates to split profits from short selling stocks, or betting they would fall. And the "lucrative job offer" from Mr. Elgindy that the government referred to in its arguments, he contended, was neither lucrative nor firm.
Mr. Royer was earning about $90,000, the lawyer said, and the offer was for $125,000 a year, offering little incentive for him to risk tarnishing his badge. "Nobody sells out their country for $800 a month," Mr. Gerzog said.
Mr. Berke said that Mr. Elgindy's Web site was not the "den of thieves" prosecutors had described. He said that Mr. Elgindy used it to allow investors to exchange information while helping to expose corporate crime. "These are law-abiding citizens, people brought together by an interest in trading," he said, adding that it was ludicrous to think that Mr. Elgindy could control the investment decisions of more than 300 people who subscribed to the site.
In a case that all parties acknowledge has little to do with terrorism, the attacks of Sept. 11, 2001, continued to be a reference point. In his closing arguments, Mr. Gerzog said prosecutors put a "negative spin" on several coincidental events to accuse Mr. Royer of interfering with a government investigation.
Prosecutors say that Mr. Royer called Mr. Elgindy to alert him that the Justice Department was examining some stock trades and comments he made on the day before the terrorist attacks suggesting the market would fall.
But Mr. Gerzog said Mr. Royer inadvertently learned about the investigation and never meant for Mr. Elgindy to find out about it. "It's absurd to think that Jeffrey Royer told Tony Elgindy" about the investigation, Mr. Gerzog said. Instead, he suggested that Mr. Royer told Derrick Cleveland, a business associate of Mr. Elgindy, who pleaded guilty to securities fraud charges and testified in this case. Mr. Cleveland then told Mr. Elgindy, the lawyer said.
"He made a mistake and told Derrick Cleveland there was an investigation into Sept. 11," Mr. Gerzog said. "It was an innocent mistake," he said, "not obstruction of justice."
nytimes.com
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Prosecutors at Fraud Trial Say Profit Was True Motive
By ERIC DASH
Published: January 15, 2005
In a final attempt to refute the claims of the two defendants, prosecutors argued yesterday that there was "overwhelming evidence" that the two, Anthony Elgindy and Jeffrey A. Royer, were working together to commit securities fraud and not to expose corporate crime.
Mr. Elgindy, a controversial Internet stock trader, is accused of receiving confidential government information from Mr. Royer, a former F.B.I. agent, and using it in an elaborate stock-selling scheme.
Yesterday, prosecutors in Federal District Court in Brooklyn made a final effort to persuade the jury that both men should be convicted of securities fraud, market manipulation and obstruction of justice.
When the case resumes on Tuesday, the 10th week of trial, Judge Raymond J. Dearie will instruct the jury and it will begin deliberations.
Lawyers for the defendants maintained that prosecutors presented an "Alice in Wonderland" view of the evidence, distorting statements and events to bolster their case.
But prosecutors said yesterday that the facts were clear: Mr. Elgindy and Mr. Royer might talk about their ambitions for law enforcement glory but their motives were corrupted by financial gain.
"It was a made-up rationale to hide their true financial motives," the prosecutor, Kenneth Breen, an assistant United States attorney, said. "The relationship with the S.E.C. and the F.B.I. served as a cover story" so that Mr. Elgindy "could pretend to get information - not glean it."
Prosecutors said that the information about criminal investigations into companies was valuable to a short-selling stock trader like Mr. Elgindy. They suggested Mr. Royer had a profit-sharing agreement with Derrick Cleveland, one of Mr. Elgindy's associates who pleaded guilty to securities fraud and testified for the government. Defense lawyers argued that any agreement was made up by Mr. Cleveland, whose story, they said, could not be corroborated or believed.
Yesterday, Mr. Breen offered documents and testimony from several witnesses in an attempt to show that Mr. Cleveland was telling the truth.
Earlier yesterday morning, Mr. Elgindy's lawyer, Barry Berke, told the jury that the government's case was far from clear.
He argued that the prosecution's timetable was not always consistent, though Mr. Breen pointed out that the defense's version omitted crucial events. Moreover, Mr. Berke raised the question of venue and urged jurors to consider it in making a decision. The case is being tried in Brooklyn, which has long been the site of penny stock fraud cases.
But Mr. Elgindy ran his Web site in San Diego, Mr. Berke said. And Mr. Royer was an agent working in New Mexico and Oklahoma.
Mr. Breen said the government was justified in trying the case in Brooklyn because several of Mr. Elgindy's Internet followers lived there and it was where the investigation he and Mr. Royer are accused of interfering with had begun.
Mr. Berke told the jury again that his client never believed he was doing anything wrong.
But Mr. Breen maintained that it was all part of a larger effort to keep law enforcement at bay while concealing the truth. The defense would have you believe that "Mr. Elgindy was a caped crusader and a crime-buster extraordinaire," he said. "I submit to you he was a criminal."
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