Witness Describes Tips by FBI Agent
A former associate of San Diego financial analyst Anthony Elgindy told jurors Tuesday that he had passed confidential information from an FBI agent to the online stock picker, who was “pretty excited” to get the illegal tips.
Derrick Cleveland, 38, who pleaded guilty in the case and is a key government witness, testified that he was a conduit for information from former FBI agent Jeffrey Royer to Elgindy. Cleveland said he referred to Royer in conversations with Elgindy as “Jeff, my FBI friend.”
Elgindy is accused of using Royer’s tips about FBI probes of companies to make insider trades, manipulate markets and extort money from firms that paid him to stop badmouthing them to customers of his online newsletter. Federal prosecutors say Elgindy engaged in short selling on companies he heard about from Royer, while continuing to spread negative news about them.
Elgindy was “pretty fired up” after Cleveland told him about probes of Seaview Technologies International conducted by the Federal Bureau of Investigation and the Securities and Exchange Commission in 2000, Cleveland testified. Elgindy circulated some of the information on his website, Cleveland said.
“He was pretty excited about it,” Cleveland said. “He thought it was good information.”
Elgindy, 36, who also went by the name Anthony Pacific, and Royer, 41, are accused of racketeering, securities fraud and other crimes. They are on trial in federal court in Brooklyn, N.Y.
Elgindy’s lawyer, Barry Berke, told jurors during opening statements Monday that his client and a group of investors who followed his advice performed a public service by exposing frauds.
“They were investigating, uncovering and exposing these fraudulent companies,” Berke said.
Cleveland told jurors that he worked with Royer as an FBI informant and that the two men devised a scheme to profit by purchasing shares of companies under investigation for stock manipulation.
When that strategy failed, Cleveland said, he and Royer began shorting stocks in 2000. Short sellers profit by correctly predicting a stock’s decline. They sell borrowed shares and then replace the stock at a cheaper price, pocketing the difference.
Their short selling proved to be more successful, Cleveland testified. For his effort, Royer was paid about $30,000 in four separate wire transfers from Cleveland, court records show.
Cleveland testified that he told Royer about Elgindy and claimed to be good friends with the online stock picker.
Cleveland, who has a prior conviction for cocaine possession, also told jurors he funneled information about companies under investigation to fund manager Jonathan Daws, who is being tried separately.
Cleveland pleaded guilty to charges of conspiracy to commit securities fraud in July 2002. As part of that plea, he is cooperating with federal authorities by testifying at Elgindy’s trial.
Elgindy has been in jail since April after trying to board a domestic flight to Phoenix, with a connection to San Diego. He was carrying fake identification, $25,000 in cash and $40,000 worth of jewelry, according to court papers.
