2 Guilty of Exploiting FBI Files
An Internet stock guru from California and a former FBI agent were convicted Monday of using confidential FBI files to manipulate stocks for profit.
After a 10-week trial, a federal jury in Brooklyn found stock trader Amr I. “Anthony” Elgindy, 37, of Encinitas guilty of racketeering, securities fraud and extortion. Former FBI agent Jeffrey A. Royer, 41, was found guilty of racketeering, securities fraud, obstruction of justice and witness tampering.
Both men face prison terms of 10 to 20 years.
Elgindy buried his face in his hands and sobbed when the jury foreman read the verdicts after five days of deliberations. Federal marshals led him out of the courtroom in tears and returned him to the Metropolitan Detention Center in Brooklyn, where he has been held since April as a flight risk. Royer is free on bail.
No date has been set for sentencing.
Operating under the moniker Anthony@Pacific, Elgindy attracted a devoted following on the Internet as a skeptical short seller during the late-1990s stock boom. He frequently attacked stocks as “overvalued pigs” and sometimes exposed questionable dealings by the often obscure and thinly traded “penny stock” companies he targeted.
Short sellers sell borrowed shares of a target company hoping that the price will collapse so that they can repay the shares at a lower price and pocket the difference.
Elgindy also profited by charging subscribers up to $600 a month for his short-sale targets and other trading tips. He was successful enough to own a $2.2-million estate in Encinitas and a fleet of exotic cars.
Prosecutors said Elgindy met Royer -- an agent in the FBI’s Gallup, N.M., office -- through a mutual acquaintance, Derrick W. Cleveland, who pleaded guilty to lesser charges in the case and emerged as the government’s star witness.
According to the government, Elgindy would funnel tips through Cleveland to Royer about potentially criminal conduct by Elgindy’s target companies, in hopes that an FBI investigation would demolish their shares.
That activity was legal, but prosecutors said the defendants crossed the line when Elgindy later induced Royer to dig up dirt on companies from FBI investigative files. The jury found that Elgindy used the information to try to drive down the companies’ stocks and to extort payments from companies -- in the form of discounted shares -- in exchange for keeping the information quiet.
“Royer violated the trust of the FBI by brazenly partnering with Elgindy to commit a laundry list of crimes,” Brooklyn U.S. Atty. Roslynn R. Mauskopf said in a statement. “Under the guise of protecting investors from fraud, Royer and Elgindy used the FBI’s crime-fighting tools and resources actually to defraud the public and to insulate themselves from detection and prosecution.”
Elgindy’s lawyer, Barry H. Berke of Manhattan, promised “a vigorous appeal,” noting that Elgindy was acquitted of 17 of the 28 charges he faced.
Ilissa Brownstein, Royer’s co-counsel with Lawrence Gerzog, said the defense team was “incredibly disappointed and surprised” by the verdict, which it will appeal.
During the trial, lawyers for Elgindy and Royer had objected to the introduction of evidence about a federal investigation -- later dropped -- into whether the Egyptian-born Elgindy had advance knowledge of the Sept. 11, 2001, terrorist attacks in part because of his short-selling activity beforehand. Elgindy said such short selling was routine for him.
The obstruction-of-justice charges, of which Royer was convicted and Elgindy acquitted, stemmed from the 9/11 probe.
Because the subject of 9/11 is so highly charged, Brownstein said, “how could it not taint the jury’s view of these defendants?”
During the trial, the defense argued that Royer and Elgindy were cooperating in a legitimate effort to uncover corporate fraud.
On Silicon Investor, a website for high-tech investors on which Elgindy sometimes launched his attacks on target companies, the conviction inspired a flood of e-mail Monday night from his critics and defenders.
“Sweet bells of justice, Ding Ding Ding!” one person wrote in reaction to the verdict.
Others wrote that “the good Anthony” had done a valuable service by exposing unsavory companies before he ran afoul of the law.
What went wrong? “I suspect it’s partly about ego, and partly about insecurity,” another writer speculated. “The two often go together.”
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Associated Press was used in compiling this report.
