Posted on 01/24/2005 11:57:20 AM PST by Calpernia
A former FBI agent and an Internet penny stock adviser were convicted Monday of mining government computers for confidential information they used to manipulate the stock market.
Former agent Jeffrey Royer was convicted of racketeering, securities fraud, obstruction of justice and witness tampering for leaking details of FBI investigations and executives' criminal histories to San Diego stock picker Anthony Elgindy.
Elgindy was convicted of racketeering, securities fraud and extortion for his role in the scheme. He dropped his face into his hands and sobbed uncontrollably as the jury foreman read the verdict; U.S. marshals led him weeping from the courtroom.
Prosecutors said Elgindy bet against penny stocks and drove down their prices by publicizing damaging information he received from Royer. Elgindy also extorted companies by offering to withhold the information in exchange for cash, prosecutors said.
Royer even tipped off the Egyptian-born financial analyst to an FBI probe into whether he profited from advance knowledge of the Sept. 11, 2001, terrorist attacks by selling off stocks that plunged after the attacks, prosecutors said. Elgindy was not charged in that investigation.
Defense attorneys contended that Royer fed FBI data to Elgindy and another trader as part of a freelance effort to sniff out corporate fraud. They argued that Royer believed Elgindy needed the information as a starting point for finding out more about companies that he and Royer could investigate together.
Elgindy's defense similarly argued that the trader released the government information on his subscription Web site because he was crusading against corporate malfeasance.
Royer was an agent in the Gallup, N.M., office investigating mostly crimes on Indian tribal land. He planned to leave the FBI and work as a private investigator for Elgindy and other traders, prosecutors said. Royer also thought the trader and his associates would help him pay off tens of thousands of dollars in personal debt, they said.
The charges carry a potential sentence of 10 to 20 years in prison.