Elgindy makes Final Leniency Plea
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."
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."
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."
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.
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.
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."
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."
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