9/11 Research Wiki

October 02, 2006 PRESS RELEASE

FORMER FBI AGENT SENTENCED TO SIX YEARS OF IMPRISONMENT FOR RACKETEERING AND SECURITIES FRAUD Defendant Provided His Co-conspirators with Confidential Law Enforcement Information Used in "Short Selling" Stock Fraud Scheme

Roslynn R. Mauskopf, United States Attorney for the Eastern District of New York, announced that former FBI Special Agent JEFFREY A. ROYER was sentenced to six years' imprisonment on his conviction for racketeering conspiracy, securities fraud conspiracy, securities fraud, obstruction of justice, and witness tampering. The sentence was imposed this afternoon by United States District Judge Raymond J. Dearie at the U.S. Courthouse in Brooklyn, New York.

ROYER, and his co-defendant, Amr I. Elgindy, were convicted after trial on January 24, 2005. On June 19, 2006, Elgindy was sentenced to nine years' imprisonment for his leading role in the racketeering conspiracy and to a consecutive two years of imprisonment on a separate conviction for making false statements to federal officials while on pre-trial release. Elgindy was also ordered to forfeit approximately $1.5 million.

Elgindy was a trader and financial analyst who engaged in the "short selling" of stock, a securities trading technique in which the trader establishes a "short position" by selling stock he has borrowed and later purchases the stock to return to the lender. The short seller realizes a profit if the stock price has decreased subsequent to the establishment of the short position. In pursuing their lucrative short selling strategy, ROYER corruptly used his position as an FBI agent to steal confidential criminal law enforcement information about companies under investigation by the FBI and the Securities and Exchange Commission, and, in exchange for the promise of cash and future employment, passed that information to Elgindy and others, who then established short positions in those companies' stocks. To ensure that the price of these stocks fell, Elgindy and his co-conspirators engaged in various manipulative activities, including the dissemination over the Internet of the confidential law enforcement information and other negative information about the companies. Elgindy also engaged in a conspiracy to use the extortionate threat of further dissemination of stolen information to procure discounted stock from issuers.

In December 2001, ROYER, who had been an FBI Special Agent since 1996 - first in the Oklahoma Field Office and later at the Resident Office in Gallup, New Mexico - left the FBI to work as an investigator for Elgindy, a position he believed could bring him millions of dollars. Before leaving, ROYER induced another FBI Special Agent, Lynn Wingate, to continue to steal information from the FBI and give it to the scheme's participants. In June 2005, Wingate pled guilty to obstruction of justice charges for her role in the fraud, and, in July 2006, she was sentenced to three years' probation. Another scheme participant, Jonathan Daws, pled guilty to securities fraud charges in April 2005, and in August 2006 was sentenced to three years' probation.

"ROYER and his co-defendants engaged in a vast securities fraud conspiracy and a shocking breach of trust for their own personal profit," stated United States Attorney Mauskopf. "We will vigorously prosecute such schemes in order to ensure the integrity of our financial markets and the security of confidential law enforcement information." Ms. Mauskopf thanked the Federal Bureau of Investigation, New York Field Office, and the Securities and Exchange Commission, Northeast Regional Office, for their assistance.

The government's case is being prosecuted by Assistant United States Attorneys John A. Nathanson and Michael Goldberger.

The Defendant: JEFFREY A. ROYER DOB: 11/26/62

An associate of online stock picker Anthony Elgindy testifies he was a conduit for secret data on probes of companies. November 03, 2004|From Bloomberg News

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 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.

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.

Assistant U.S. Attorney Kenneth Breen in U.S. District Court in Brooklyn during the arraignment of Lynn Wingate, who is on administrative leave from the FBI, and former agent Jeffrey Royer on charges they were involved in a stock trading racketeering conspiracy.

During arguments over whether Royer should be given bail, Breen said that the former agent posed a risk of flight, partly because of classified information about "another subject matter" that was unearthed during the execution of a search warrant of his possessions. During a hearing in San Diego last week, Breen said that Elgindy's attempt to liquidate the trust accounts of his children on Sept. 10 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."

Defense attorney Jeanne G. Knight said it was an attempt by the prosecution to smear Elgindy, a U.S. citizen and native of Egypt, with "terrorist innuendos."