Once high-flying stock speculator Elgindy faces accusers thi

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Once high-flying stock speculator Elgindy faces accusers thi

Postby admin » Tue Mar 22, 2016 6:32 am

Once high-flying stock speculator Elgindy faces accusers this week
by Dean Calbreath
UNION-TRIBUNE STAFF WRITER
June 16, 2002

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Bribery. Extortion. Insider trading. And, worst of all, possible collusion in the Sept. 11 terrorist attacks.

For several weeks, those allegations have been hanging over Amr "Anthony" Elgindy, a once-high-flying San Diego stock speculator who now faces federal charges that he bribed FBI agents for confidential information.

This week, Elgindy is scheduled to be flown from his holding cell in the federal prison in downtown San Diego to a similar cell in Brooklyn, where he will await trial.

But as federal prosecutors prepare to arraign Elgindy, a closer look at the indictment reveals that the government may have some hurdles as it brings its case to trial.

The Justice Department accused Elgindy of conspiring to bribe FBI agents to obtain "confidential, non-public" criminal records – information that he allegedly used to predict which stocks would fall and to persuade companies to pay for his silence.

But much of the information Elgindy allegedly obtained was not confidential. Instead, it was available free on the Internet or for minimal charges from state police departments. If it was indeed public information, that would damage the government's charges that Elgindy was trading on insider information.

The government's case rests on the suspicious timing of Elgindy's attacks on several companies, which occurred shortly after two FBI agents accessed the agency's criminal files involving those companies.

In addition, in arguing against bail for Elgindy, a government prosecutor alleged that he might have had knowledge of the Sept. 11 terrorist attacks. But Elgindy's e-mails that week reveal that he was surprised by the attack and that he spent the first few days telling speculators not to short the market – that is, not to sell stock on a bet the market would go down.

Kenneth Breen, the Brooklyn federal prosecutor in charge of Elgindy's case, declined to return phone calls regarding the case. Elgindy also declined to be interviewed, although he did send a brief letter to The San Diego Union-Tribune outlining his feelings about the case.

Before his arrest, Amr Elgindy was a successful stock speculator, with a $2.2 million home and collection of expensive cars. He made his money through short-selling, meaning that he borrowed stock, immediately sold it and then waited for the price to go down so he could replace it at a cheaper price.

In essence, short-sellers are betting that the stock price will go down. And some, including Elgindy, work to make the stocks go down by disseminating negative information about companies to other speculators.

Elgindy used his Web site and Internet chat rooms to spread the negative information. Often, Elgindy passed tips on corporate fraud to the FBI or the Securities and Exchange Commission. When they launched investigations, he made money by short-selling the stock.

Some who know him say he got legitimate pleasure from spurring legal investigations.

"I know Tony felt like he was on the government's side," says Mary Cummins, an investor who followed his comments on the Web. "He took great pleasure when they finally won a court verdict against the suspect company. It's just amazing that they are now claiming that he used the FBI."

According to the federal indictment, Derrick Cleveland, a subscriber to Elgindy's on-line stock comments, paid $30,425 to Jeffrey Royer, an agent in the Albuquerque office of the FBI, between November 2000 and May 2001.

In return, Royer allegedly passed confidential criminal records of certain corporate executives to Cleveland, who in turn passed the information on to Elgindy. Elgindy, in turn, would then start shorting the stock and spread the word of the criminal records over the Internet to drive the price down.

In his letter to The Union-Tribune, Elgindy strongly denied the accusations. "I have never given Royer a dime for info!" Elgindy wrote.

The government charges that Elgindy used information from Royer at least four times before short-selling a stock.

On Jan. 2, for instance, Royer scanned the FBI's nationwide criminal database for the name of Richard McBride, founder of Florida's SeaView Video Technology. The next day, Elgindy's Web site blasted SeaView, noting that McBride was serving six years of probation for fraud.

At the time that he published his attack, Elgindy – who had been shorting the stock for weeks – said he got the information on McBride on the Web, rather than from any confidential law enforcement source.

In fact, the information about McBride was available on the Florida Department of Corrections' Web site, which lists all felons on probation, for no charge to the public. Elgindy copied the department's listing and posted it on his Web site.

Bradd Milove, a San Diego attorney who once sued Elgindy for mishandling a client's funds, said the public availability of that information should aid Elgindy, whether or not he was tipped by the FBI.

"How can you charge that somebody was using insider information if it is publicly available?" Milove asked.

Similarly, in December, Elgindy announced he had discovered that Paul Maurice Brown, founder of Idaho's Nuclear Solutions, was a "convicted felon." The announcement came an hour after Royer did a search in the FBI database for Brown's name.

Although the timing of Elgindy's announcement is suspicious, news of Brown's arrest record was easily obtainable. In 1991, Brown himself wrote an open letter to business associates, which has since been posted to the Web, noting that he had twice been arrested for "drug making."

Brown was arrested for possessing chemicals that could be used to make methamphetamine. But he was never convicted. The charges were dropped after Brown showed that the chemicals were being used in experiments to find a new way of disposing of nuclear waste – Nuclear Solutions' core business.

Idaho State Police say the records of Brown's arrests and releases could be obtained by sending in $10 and a form available over the Internet. So why would Elgindy or Cleveland have paid $30,425 for such information? In his letter to The Union-Tribune, Elgindy suggested the money was not a bribe but instead a loan. Cleveland and Royer were childhood friends, he says, adding that "Royer, as I understand, is financially destitute, with $150,000 in debts."

Even if there was a less innocent reason for the payments, Elgindy maintains his own hands were clean. Cleveland, he notes, was merely one of his Web site subscribers and was never on his payroll.

Those familiar with Elgindy's Web site say it would not have been uncommon for subscribers such as Cleveland to pass on a tip about shorting a stock, without necessarily revealing where they got the tip from.

Kirk Lindstrom, who hosts an Internet chat room where Elgindy has engaged in short-selling promotions, suggests the government "might be looking for a public figure to draw the attention. It's not as exciting for the FBI if it turns out a subscriber bought the news and just passed it on to Elgindy."

In addition to the bribery charges, federal prosecutor Ken Breen noted that Elgindy had tried to liquidate his children's $300,000 trust account on Sept. 10. Breen said that might "perhaps" mean he had "pre-knowledge of the Sept. 11 attacks, and, rather than report it, he was attempting to profit from that information."

But the stock sales were not finalized until the market reopened Sept. 18, at which time Elgindy – like most investors who sold that day – would have brought in much less money.

Elgindy's activities on the week of Sept. 11 reveal that he spent the first three days after the attack urging speculators not to short the market – an unusual position for a person who typically tried to whip investors into short-selling frenzies.

"Many helpless and confused members of the public will undoubtedly be subject to knee-jerk reactions to liquidate positions," he wrote.

"Those who have the wherewithal will be tempted to exploit our fellow Americans, who may need to sell, or who may simply be scared. We make a request that You refrain from such activity. To profit from this tragic event would only reward Terror, and Terror cannot be rewarded. This was an act not about Religion or Politics but about Cowardice."
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