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Amr Ibrahim "Anthony" Elgindy, a stock trader who ran a subscription-based investing Web site, was found guilty Monday of racketeering and securities-fraud charges.
Former Federal Bureau of Investigation agent Jeffrey Royer was found guilty of the same charges. The two were charged in a May 2002 racketeering indictment.
Mr. Elgindy was downcast as he entered the courtroom, appearing nervous, with his eyes closed or focused on his lap. The jury found Mr. Elgindy guilty of 11 counts against him, including five counts of securities fraud, a count of racketeering conspiracy, a count of securities fraud conspiracy, a count of extortion, a count of extortion conspiracy, and two counts of wire fraud.
As the jury read the verdict, there were gasps and cries from the crowd and defense table, leading Judge Raymond Dearie to halt the proceedings so Mr. Elgindy could be taken from the courtroom.
Mr. Royer was found guilty of nine of 14 counts against him, including four counts of securities fraud, a count of securities fraud conspiracy, a count of racketeering conspiracy, a count of obstruction of justice conspiracy, a count of obstruction of justice and a count of witness tampering.
The government accused Mr. Royer of sharing confidential information from FBI computers with Mr. Elgindy and others. Federal prosecutors told jurors during the 10-week trial that Mr. Elgindy used the information to manipulate shares of small companies and to extort discounted shares from two companies, Floor Decor Inc. and Nuclear Solutions Inc.
Three other defendants, Lynn Wingate, Troy Peters and Jonathan Daws, will be tried separately. Three more defendants, Derrick Cleveland, Robert Hansen and Kent Terrell, have pleaded guilty and are cooperating with the government.
According to the indictment, Mr. Elgindy used a private investing Web site to share some of the information he obtained from Mr. Royer and other law-enforcement officers with site members. The government alleged that Mr. Elgindy organized site members in order to maximize the impact of the release of negative information on the price of targeted companies.
The prosecution, using numerous logs of online exchanges among some of the 300 members of Mr. Elgindy's Web site, argued that Messrs. Elgindy and Royer used nonpublic information to push down the price of the shares of companies they sold "short." Short sellers borrow stock and sell it, hoping to buy back the shares when the price has fallen, and then pocket the difference.
Messrs. Elgindy and Royer also were accused of having conspired to obstruct an investigation into suspicious trading that took place shortly before the Sept. 11 attacks on the U.S. That probe soon turned into a federal investigation of the peculiar relationship between Messrs. Elgindy and Royer. Assistant U.S. Attorney Ken Breen told jurors during the government's rebuttal that Mr. Royer shared information about the Sept. 11 investigation with Mr. Elgindy and that the short seller took steps to flee to Lebanon.
Mr. Royer, who admitted in court that he shared confidential information with Mr. Elgindy and others, had argued he only did so because he wanted to get information from them in return. Mr. Royer also admitted in court that he told Derrick Cleveland, a cooperating defendant in the case, about the Sept. 11 investigation but he denied that he told Mr. Elgindy about it.
Barry Berke, one of Mr. Elgindy's lawyers, said in his closing argument that Mr. Elgindy didn't know about the Sept. 11 probe and that his client's trip to the Middle East and transfer of money to Lebanon were innocuous events unrelated to the investigation. Mr. Elgindy returned to the U.S. in December 2001 and had requested permission to travel back to Lebanon in early 2002. That request was denied. He and Mr. Royer were arrested on May 21, 2002.
The former FBI agent also was charged with witness tampering because of a telephone call he made to a former colleague after his May 2002 indictment. Prosecutors alleged that Mr. Royer attempted to influence the potential testimony of Michael Mitchell, a police officer whom Mr. Royer used to access confidential government information after he left the FBI.
Mr. Elgindy was charged with several counts of securities fraud and wire fraud for trading ahead of members of his Web site or contrary to his advice to them.
Write to Eric J. Weiner at eric.weiner@dowjones.com4 and Carol S. Remond at carol.remond@dowjones.com5
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