Elgindy makes Final Leniency Plea
Canada StockWatch
by Lee M. Webb
March 22, 2006
Amr (Anthony) Elgindy, a convicted securities fraudster who conducted many of his trades through Vancouver-based Global Securities Corp., has submitted a last-minute plea for mercy to a U.S. judge scheduled to sentence the short seller on March 22.
Mr. Elgindy faces the possibility of a life sentence after being convicted on 11 counts of a 32-count indictment for racketeering, securities fraud and extortion.
As previously reported by Stockwatch, six other defendants have been convicted in the case and are also awaiting sentencing some time after the court determines Mr. Elgindy's appropriate punishment.
Jeffrey Royer, a corrupt
former FBI agent who passed confidential law enforcement information on to the short
seller, was tried along with Mr. Elgindy and convicted on nine of 15 counts including
racketeering conspiracy, securities fraud and obstruction of justice.
Another Global client,
Derrick Cleveland, a former U.S. broker and ex-convict who served time for drug
trafficking, copped an early plea to racketeering and testified against co-accused Mr.
Elgindy and Mr. Royer.
Robert Hansen, who operated
a website for Mr. Elgindy, and trader Donald Kent Terrell both pled guilty to conspiracy
to commit securities fraud and co-operated with the government.
Hedge fund manager Jonathan
Daws also pled guilty to conspiracy to commit securities fraud. The government is seeking
a prison term of 18 months to 24 months for Mr. Daws.
Mr. Royer's girlfriend and
former FBI agent Lynn Wingate pled guilty to obstruction of justice.
The U.S. government thinks
that Mr. Elgindy, the central figure in the case, should be locked up for life.
Mr. Elgindy's defence team
argues that the short seller, who will also be sentenced on a separate conviction relating
to his April 17, 2004, attempt to board an airplane using fake identification while on
pretrial release, should spend no more than 41 months in prison.
As reported by Stockwatch,
Mr. Elgindy was rather sharply rebuked by U.S. District Court Judge Raymond J. Dearie on
Feb. 28 after he bypassed his counsel and submitted a letter directly to the judge.
Judge Dearie expressed his
displeasure "with the familiar tone" of Mr. Elgindy's letter and ordered the
court clerk to return all communications from the defendant.
That may have caused Mr.
Elgindy some consternation inasmuch as he had been working on a much more substantive
letter that he hoped to present to the judge before sentencing on March 22.
Mr. Elgindy's defence
lawyers, Brian Berke and Eric Tirschwell of Kramer Levin Naftalis & Frankel LLP,
attempted some damage control and offered their client's apology to Judge Dearie on March
16.
On March 21, Mr. Berke and
Mr. Tirschwell rather tentatively submitted a two-part, 21-page letter from Mr. Elgindy to
Judge Dearie.
"We believe and hope
that our submitting this material on Mr. Elgindy's behalf is not inconsistent with the
Court's order of February 28, 2006, which we understood as barring any direct
communications by Mr. Elgindy with the Court or its staff, but not prohibiting a
sentencing letter that Mr. Elgindy submitted through counsel," the defence lawyers
wrote.
Swimming in ego
"The prosecutors have
portrayed me as a bad man who sought to hurt average people and it is so sad because
nothing could be further from the truth," Mr. Elgindy opens his rambling and
frequently disjointed letter to Judge Dearie.
According to the short
seller, his "Dear Anthony" thread on Silicon Investor, InsideTruth.com and
subscription-based AnthonyPacific.com were "all created and open for average
people."
"I love people, I loved
teaching and I loved entertaining them," Mr. Elgindy writes. "I would like your
Honor to hopefully get an idea of who I really am and what really motivates me."
In a single paragraph, Mr.
Elgindy sketches his early career as a stockbroker, which began in 1998 when he was 20
years old.
"I did very well
(income-wise), paying taxes on over $500,000 as early as 1991 at the tender age of
23," Mr. Elgindy says, adding that he bought his first Ferrari and limousine then.
(All amounts are in U.S. dollars.)
"When we moved to
Texas, I bought the biggest house I could find in Colleyville, for $475,000," he goes
on. "I was swiming (sic) in my own ego."
While Mr. Elgindy was
swimming in his own ego, a pastime he clearly still engages in, he notes that trouble was
brewing by the summer of 1993 when he "shut down the firm (Armstrong McKinley) and
checked into Charter Hospital."
Mr. Elgindy reports that he
went on disability and collected $7,500 per month for 17 months.
"It was during this
time when I hid 4 months of employment from Mass Mutual," Mr. Elgindy writes, a
reference to the insurance fraud for which he would later serve time.
In January of 1995, Mr.
Elgindy says he "officially" ended his disability and started Key West
Securities. At the same time he reports that he co-operated with the U.S. Attorney's
Office in San Diego, Calif., who "was after my ex-partner, Russ Armstrong and his
promoter friend (sic), Lloyd Richards."
Dear Abby of Wall
Street
"In 1997, my assistance
was significant enough, and I had become high profile enough, that ABC's 20/20 contacted
me, not only about my work with the USAO in San Diego, but also about my work at Key West
exposing scams that traded on markets overseen by the NASD as well as the NASD
itself," Mr. Elgindy says.
"In 1998, I moved my
family back to San Diego, where we bought our second home for over $800,000," Mr.
Elgindy continues.
That same year, Mr. Elgindy,
who claims the 20/20 interview marked the beginning of the end of his career as a NASD
member, shuttered Key West Securities and opened Pacific Equity Investigation (PEI).
"PEI would focus not
only on scams and overvalued stocks, but would attack the NASD itself as a corrupt
'boys-club' of self dealing," Mr. Elgindy writes.
"I created the Dear
Anthony thread on Siliconinvestor and began my career as the 'Dear Abby' of Wall
Street," he goes on.
"One of my earliest
accomplishments was when I exposed that the NASD's own president (Frank Zarb) had been
found to have defrauded an investor out of $5-million by a jury," Mr. Elgindy
recalls, going on to rather pointedly suggest that he was subsequently persecuted by the
NASD.
"Mr. Zarb was not
happy," says Mr. Elgindy. "The NASD went on to revoke my license, and file two
cases against me for manipulation and perjury. Cases that were both brought in bad faith
and cases they would lose multiple times."
Rather awkwardly changing
gears, Mr. Elgindy says that his popularity grew as he "traded and posted in
real-time."
"My trading, my timing,
my skills at dissecting financial and news announcements for hidden clues and fraud are
all blessings that I cherished and guarded," the short seller writes. "Because I
had come from a checkered past of bucket shops, my credibility and accuracy became an
obsession.
"I offered thousands
and thousands of dollars in rewards if anyone could find errors or any false statements.
"Accuracy and
credibility were all I had, if I went public with something, people knew I could back it
up with proof.
"This is why I have
never lost a single lawsuit filed by any of the multiple scams that tried."
Knock on the door
Mr. Elgindy goes on to spend
some time discussing his arrest and subsequent conviction for insurance fraud,
notwithstanding a letter of commendation written on his behalf with respect to his work in
flipping on his former partner Mr. Armstrong and promoter Mr. Richards.
"One beautiful day in
July of 1999, I got a knock on the front door, two men introduced themselves as FBI
agents," Mr. Elgindy recalls. "They then told me they were there to arrest me,
and they had a warrant from Texas.
"I replied that there
had to be some kind of mistake. I said the statue of limitations had run out and besides
that I had a letter.
"They assured me there
was no mistake, my letter was useless and there were indeed a few more days on the
statute.
"They then told me that
yes, they knew who I was, they knew all about 20/20, all the magazine stories and they
really didn't care.
"They then asked me to
please shut up, get dressed and go with them, which I did."
Mr. Elgindy eventually pled
guilty to mail fraud and reportedly expected to get off with probation.
According to the short
seller, more than 100 people flew in to attend his sentencing hearing in Texas. However,
things did not work out as Mr. Elgindy had hoped. He was sentenced to four months in
prison, four months of home detention and three years of supervised release.
"I'm sure it won't
surprise your Honor to learn that I broke down emotionally and sobbed openly," Mr.
Elgindy, who also broke down sobbing when convicted in this case, writes. "It was the
end of the world to me."
Prison snitch
Mr. Elgindy says that he
initially felt betrayed and was afraid, but he turned that fear to his benefit and
"replaced the feelings of betrayal with gratitude."
"I weighed 222 pounds
when I entered, and I began exercizing (sic)," Mr. Elgindy awkwardly adds.
"Prison official who
knew who I was approached me to see if I would help them, to detect contraband and corrupt
members of the staff," Mr. Elgindy goes on.
"I jumped on the
opportunity, with absolutely no benefit to me and at great personal risk, I wore a body
wire amongst the prison's population," the short seller again awaiting sentencing
reports. "I signed some DOJ form and I was on my own.
"I did this because it
seemed to be the right thing to do, after all this is who I claimed to be and this is how
I defined myself.
"I was honored and
flattered that they would ask me to help them."
Mr. Elgindy does not
disclose the results of his stint as a prison snitch, but his exercise routine evidently
worked pretty well.
"On Oct. 6th when I was
released, I weighed 169 lbs," Mr. Elgindy writes. "I had lost 53 lbs. and was
running 5 miles a day."
Clean slate
Mr. Elgindy says that when
he got out of prison in October of 2000 after serving his four months, the fraudulent
insurance claim incident had finally been paid in full and he could now start over with a
"completely clean slate."
"I made a vow to myself
and my family that I would never put myself in a position to jeopardize my freedom ever
again," Mr. Elgindy says.
According to the short
seller, the four months of home detention passed quickly and he resumed a normal life.
"I saw that people I
had dealt with at the SEC or elsewhere continued to take my calls and treat me with
respect," Mr. Elgindy writes. "I was beyond happy that these people found value
in my work."
Mr. Elgindy says that
following the rules was easy.
Over his 10-year career as a
short seller, Mr. Elgindy reports that on many occasions he lost between $200,000 and
$500,000 in a single day.
"Once in 1996, I was
down to $11,000 in excess net capital at Key West, and not once did I ever dream of
engaging in any kind of criminal scheme," Mr. Elgindy says. "I traded my way
back to $1-million dollars (sic) and I developed money management rules that I taught for
free on Dear Anthony.
"My claim with Mass
Mutual was it, that was the last of my mis-deeds (sic).
"I had no reason and
most of all no need to do anything illegal.
"I had worked with
govt. agents shoulder to shoulder for years.
"I knew exactly how
powerful the government was and I was thrilled to be working with them on the right
side."
The rogue agent
Mr. Elgindy suggests that he
really had no way of knowing that Mr. Royer was a rogue FBI agent.
"When I did eventually
speak to Mr. Royer he told me what his objectives and goals were," Mr. Elgindy
writes. "He sounded pretty legitimate to me.
"I had been used to SEC
attorneys that spoke animatedly about stocks but not an FBI agent that was as
enthusiastic.
"At trial, Royer took
the stand and that made me happy because I though that finally, finally the jury would get
to see who this man really was.
"The jury will get to
see his smugness, his arrogance, they will finally see how controlling he is."
According to Mr. Elgindy,
witness after witness took the stand and described how much they believed in Mr. Royer and
trusted him.
"These men are veteran
law enforcement professionals, men who are trained to detect criminals and
deception," Mr. Elgindy says. "If these men trusted him and believed in him, how
exactly was I supposed to be better equipped to know Royer was no good??
"If anything I was more
easily impressed, more flattered and more trusting."
Amazing conviction
Moving to the topic of his
conviction with respect to charges of insider trading on four stocks, Mr. Elgindy spends
some time discussing the conviction relating to PolyMedica Corp., which he claims is
amazing.
According to Mr. Elgindy,
the corrupt FBI agent Mr. Royer did not conduct any searches of law enforcement databases
for PolyMedica until 51 minutes after CIBC World Markets reported on March 23, 2001, that
they had confirmed an FBI investigation into the company.
Mr. Elgindy says that he
never traded the stock based on Mr. Royer's search and, in fact, did not trade PolyMedica
at all that day.
Indeed, the short seller
claims that he did not trade PolyMedica until three days later when he executed his only
transactions in the stock, buying and selling 2,000 shares within a few minutes and losing
$60 on the trades.
"I doubt that anyone
would try to argue that trade was informed by anything," Mr. Elgindy says.
According to Mr. Elgindy,
the jury failed to check anyone's trading records, which in his case would have shown that
he did not trade based on confidential law enforcement information.
For fun
Mr. Elgindy says that he
made his "real money in overvalued, highly volatile and liquid stocks" like
Healtheon Corp. and even Enron.
The short seller claims that
overblown bulletin board promotions and scams "were more for fun than for
profit."
"These companies, in
order to attract investors, had to come up with crazy, unusual and fantastic sounding
prospects," Mr. Elgindy says. "These same tactics are what made these stocks the
easiest to dismantle.
"They had to stand up
and beat their chest, screaming 'look at me.'
"It is an undeniable
fact that I traded hundreds of stocks that earned me a lot more money than any of the
stocks in this case.
"I made more shorting
HAND than all my gains in these stocks combined 3 times over.
"What is not clear and
what is baffling is why on earth would I need FBI or SEC information on ONLY the most
obvious scams?
"This seems to make
more sense if somebody is a complete failure at trading, and a complete failure in all
legitimate avenues of making money."
Mr. Elgindy goes on to say
that it would only make sense if a person needed an extra edge and had a best friend in
the FBI who obliged, a pretty obvious swipe at the prosecution's key witness Mr. Cleveland
and his buddy Mr. Royer.
The chill
Mr. Elgindy makes a number
of claims about SulphCo Inc., a resuscitated promotion headed by Rudy Gunnerman now
trading on the American Stock Exchange that the short seller took to task as an overblown
pump and dump scheme several years ago.
SulphCo briefly soared to
$19.70 earlier this year, but the stock quickly tumbled as millions of shares changed
hands. It has recently been hovering around $6.50 per share.
"These days nobody is
willing to say a single thing about stock scams, these scams have mushroomed and are now
running rampant," Mr. Elgindy says. "Fraudsters know that they will not be
publicly exposed and nobody is willing to risk their liberty, since investors have been
told that you can indeed go to jail for telling the truth, if you do it in a certain way,
that seems to be only known by a special person."
According to Mr. Elgindy,
there has been a sea change since Sept. 11, 2001.
"Thanks to 9/11,
complaints that for years had fallen on deaf ears, suddenly found an audience," Mr.
Elgindy says. "Prior to 9/11 neither the SEC nor the FBI paid any attention to stock
scammers and promoters who complained about being hampered by short sellers.
"After 9/11, for the
first time ever, my nationality mattered, officially.
"In less than 7 months,
my entire life and 18 year career on Wall Street came to a blinding end.
"I was silenced and
Inside-Truth went dark.
"People who had
shamelessly promoted scams like Liviakis and Matt Tyson were being rewarded.
"All my work, including
my reports on Sulphco disappeared, critical posts about overvalued stocks in general have
all but vanished.
"My arrest and
prosecution under novel theories has chilled the message boards."
Mr. Elgindy is evidently
convinced that he would have some influence on SulphCo's recent resurgence and sharp
retracement, perhaps saving some investors from financial losses.
"There is no doubt in
my mind that had I been still working, and writing, Mr. Gunnerman and Sulphco would have
never been able to do what they just did again," says Mr. Elgindy. "They would
never have been able to suck in the tens of thousands of investors they managed to attract
with their unchallenged PR nonsense.
"Instead the short
seller who 1st uncovered SLPH's (the company's former ticker symbol) crimes and linked
Gunnerman to numerous past failures and schemes, is in jail and Mr. Gunnerman is out there
walking free.
"It's truly unfortunate
because 4 years ago, it was SLPH that was properly under both SEC and FBI investigation,
now we are in a world turned upside down.
"Brent Baker who was
once hot on Sulphco's tail, has left the SEC and now works for a publicly traded scam
himself."
Have mercy
Nearing the end of the first
and longer part of his two-part sentencing letter, Mr. Elgindy reviews some of his family
circumstances.
Among other things, Mr.
Elgindy says that he and his father, who was strict and "believed in corporal
punishment," were not close.
"My father didn't drink
or gamble nor did he have any vices that I could see, but he was brutally tough," Mr.
Elgindy writes. "He used the belt and he used it often."
Mr. Elgindy says that he
gives his father "credit for some extremely valuable things" that he has taken
and implemented in his own life.
"The best things my
father ever taught me were on how NOT to deal with children," Mr. Elgindy writes.
"By using his actions as a guide I knew exactly what not to do.
"I never wanted any of
my children ever to feel about me the way I did towards my father."
Mr. Elgindy says that his
three sons are everything to him.
"My sons are the
beginning and the end of everything I did," Mr. Elgindy writes. "I was their
hero and I tried to conduct myself with them that way.
"I tried to be the man
portrayed on 20/20, the magazine articles and the books. "I wanted to be their hero
and I really was."
According to Mr. Elgindy,
his children "are suffering real damage, damage that will follow them for the rest of
their days."
Mr. Elgindy awkwardly segues
into a reminiscence of his days as "one of only 500 or so NASDAQ market-makers in the
world" when he "knew about dozens and dozens of SEC and FBI investigations all
going on simultaneously" before returning to a discussion of his family.
"I may not have been
close to my father growing up, but I did love him, and still do," Mr. Elgindy writes.
"I simply cannot imagine having grown up without him, belt and all.
It's because of this
realization that I cannot even begin to imagine how my absence has, is and could affect my
kids.
"In the end, it's you
sir, that decides what is or isn't fair.
"I implore your Honor,
to have mercy on my boys, 3 boys who love and really and truly need their Dad.
"Have mercy on me, let
me please help them get A's and B's.
"Please allow me to
help my wife raise 3 troubled and sensitive boys so that they can grow into loving, kind
and law-abiding young men.
"Please help us from
losing them.
"I seek leniency
because I though I was doing something good.
"Eighteen years on Wall
Street and I have nothing to show for it.
"Thousands of scams
exposed, yet my reputation is that of a corrupt 'terrorist.'
"I have been completely
ruined, please have compassion on me, on all of us.
"Please send me home to
my boys."
Stockwatch will continue to
follow developments.