FBI Agents Charged in Securities Fraud

Two FBI agents helped an Encinitas-based stock “short seller” shake down publicly traded firms by sneaking him confidential information on investigations of the companies, authorities alleged Wednesday.

Lynn Wingate, an FBI agent assigned to the bureau’s Albuquerque office; Jeffrey Royer, a former Oklahoma City agent who resigned late last year; and short-seller Amr “Tony” Elgindy were among five men charged in a securities fraud indictment unsealed in federal court in Brooklyn, N.Y.

A judge ordered Elgindy, 34, held without bond Wednesday after prosecutors contended he was a flight risk. He was taken into custody in San Diego. Bail was set for an associate, Troy Peters, 39, at $200,000.

In 2000 and 2001, another associate of Elgindy, Derrick Cleveland, wired Royer $30,000 while he was an FBI agent, the indictment said.

In exchange for money, the agents used FBI databases to provide their co-conspirators inside FBI information on publicly traded companies, the papers said.

In one case, Royer searched the FBI’s confidential National Crime Information Center database and found the criminal history of a top executive for a firm called Nuclear Solutions, the papers said. The same day, Elgindy began sending e-mails calling the executive “a convicted felon,” the papers added.

Elgindy spread negative information on the firms on his Web site, AnthonyPacific.com, and to Brooklyn subscribers of his e-mail newsletter, InsideTruth.com, while short-selling the shares--that is, borrowing stock and selling it, betting that the market price would drop.

If the bet was correct, Elgindy could buy back the borrowed shares at a lower price and pocket the difference between that price and the sale price.

The defendants “sometimes reported negative information about the targeted companies to the Securities and Exchange Commission and the FBI in order to initiate or hasten regulatory and law enforcement action, which they knew would cause the stock prices to fall sharply once such action became public,” the indictment said.

Elgindy, who also operates a company known as Pacific Equity Investigations, and Cleveland also extorted cheap or free shares of stock in exchange for agreeing to stop their smear campaigns, authorities said.

After Elgindy and Royer became the focus of a grand jury probe, Wingate allegedly fed Royer--by then an employee of Elgindy--secret information, including descriptions of subpoenaed documents.

The charges “reveal a shocking partnership between an experienced stock manipulator and law enforcement agents, undertaken for their illicit personal financial gain,” said U.S. Atty. Alan Vinegrad.

Royer, 39, and Wingate, 34, were in custody in Albuquerque, and Cleveland, 37, in Oklahoma City, pending court appearances. Their attorneys could not be immediately reached for comment.

If convicted of racketeering conspiracy and other charges, each man could receive 20 years in prison.