Agents Deny Guilt in Fraud Case

A current and a former FBI agent pleaded not guilty Tuesday to helping an alleged stock manipulator by giving him secret information from FBI computers.

Former agent Jeffrey A. Royer, 39, and Lynn Wingate, 34, a New Mexico-based special agent on administrative leave from the bureau, were arraigned in U.S. District Court in Brooklyn before Judge Raymond J. Dearie. Their pleas were entered by their court-appointed lawyers.

For the second time, the lead prosecutor said the case, centered on Encinitas, Calif.-based investor Amr I. “Anthony” Elgindy, may have implications that go beyond the fraud, racketeering and obstruction-of-justice charges outlined in the federal indictment unsealed last week.

On Friday, Assistant U.S. Atty. Ken Breen, arguing before a federal magistrate judge in San Diego at Elgindy’s initial bail hearing, questioned whether the Egyptian-born investor may have had advance knowledge of the Sept. 11 terrorist attacks, and tried to profit from the information. The magistrate said he would disregard Breen’s statement, but nonetheless denied bail for Elgindy.

On Tuesday, in arguing against bail for Royer, Breen said authorities found “classified information” among Royer’s belongings last week when they searched Wingate’s Albuquerque home. Prosecutors said Royer and Wingate were living together.

The classified material could make the case much more serious, Breen said. Pressed by Dearie, the prosecutor said he could not discuss details except in a private conference. No such conference was set, although the judge ordered Royer to return to court Thursday for further discussions on bail.

Royer and Wingate were indicted May 22 along with Elgindy, a controversial stock speculator with a large following on the Internet, and two of his associates, Derrick W. Cleveland and Troy Peters.

According to the indictment, Elgindy, Cleveland and Peters used FBI investigative material--supplied first by Royer and later by Wingate--in targeting companies’ shares for “short sales.” In a short sale, a trader borrows stock and sells it, betting the price will fall. If the bet is correct, the trader can replace the borrowed shares later at cheaper prices.

Cleveland, who was Royer’s primary contact, paid the agent $30,425 over six months in exchange for the information, according to the indictment. Royer allegedly recruited Wingate to supply confidential material after he left the bureau in December.

Breen said in court Tuesday that after his arrest, Royer admitted to much of what he was accused of, including supplying Elgindy with information from FBI files.

However, Royer’s lawyer, Lawrence Gerzog of Manhattan, denied any such admissions. “My client has assured me that he is completely innocent, and we intend to contest these charges,” he said.

Gerzog confirmed that Royer left the FBI last year but said he did not go to work for Elgindy’s firm, Pacific Equity Investigations, as the government asserts.

“That’s one of many errors in the indictment,” Gerzog said. He also said that as a father of three young children who live with his ex-wife near Denver, Royer has strong ties that would keep him from fleeing prosecution.

Royer, athletic-looking with close-cropped hair, wearing a black suit and blue tie, was ordered confined to the home where he is staying with a relative in New Jersey.

Wingate, with long blond hair and a slight build and dressed in a dark, pinstriped pants suit, was released on $100,000 bail, pledging as security some land she owns in Colorado plus her mother’s home in Florida. Her mother attended the hearing.

Wingate’s lawyer, Ian Yankwitt, declined to comment on the charges after the hearing.

In suggesting that Elgindy may have had advance knowledge of the Sept. 11 attacks, Breen said Friday that Elgindy had asked his broker the day before the attacks to liquidate a $300,000 account held in trust for Elgindy’s children. Breen quoted Elgindy as saying the stock market would soon plunge.

At least publicly, however, Elgindy took a strong stance against profiteering related to the attacks. In statements released Sept. 12 and Sept. 13, he urged his followers to refrain from short-selling investments such as airline stocks, New York real estate investment trusts or the U.S. dollar.

“Those who have experience and those who have the wherewithal will be tempted to exploit our fellow Americans, who may need to sell, or who may simply be scared,” wrote Elgindy, identified as the “investigative director” at his public Internet site, InsideTruth.com.

“We make a request that you refrain from such activity,” he said. “To profit from this tragic event would only reward terror, and terror cannot be rewarded.”

Elgindy’s attorney, Jeanne Knight, said Friday that the timing of Elgindy’s call to his broker was coincidental and accused the prosecutor of using racial profiling to smear her client. Elgindy holds dual American and Egyptian citizenship, prosecutors said.

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Times staff writer E. Scott Reckard contributed to this report.