TSX-V's Global Client Elgindy Rebuked by U.S. Judge

Amr (Anthony) Elgindy, a securities fraudster who conducted many of his trades through Vancouver-based Global Securities Corp., has received a rather sharp rebuke from U.S. District Court Judge Raymond J. Dearie ahead of a sentencing hearing that could bring the convicted short seller a life sentence.

Mr. Elgindy was arrested in May of 2002 and convicted on 11 counts of a 32-count indictment for racketeering, securities fraud and extortion in January of 2005. His oft-postponed sentencing is now set for March 22.

As previously reported by Stockwatch, six other defendants have been convicted in the case and are also awaiting sentencing.

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.

Mr. Royer's girlfriend and former FBI agent Lynn Wingate pled guilty to obstruction of justice.

Mr. Elgindy, the central figure in the case, 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.

The prosecution argues that Mr. Elgindy's crimes warrant a life sentence.

The short seller's defence team, on the other hand, says that he should be sentenced to less than 41 months.

As reported by Stockwatch, Mr. Elgindy's lawyer, Barry Berke of Kramer Levin Naftalis and Frankel LLP, filed the defence's reply to the government's sentencing memorandum on Feb. 24.

In the normal course, the defence's Feb. 24 reply brief would probably have marked the last filing ahead of the scheduled March 22 sentencing hearing. However, Mr. Elgindy evidently had some additional issues that he wanted to address.

In an unorthodox move, Mr. Elgindy, who has been back in jail since the April 17, 2004, airport incident, bypassed his counsel to contact Judge Dearie directly.

Dear Ellie

Mr. Elgindy forwarded his typed two-page, single-spaced correspondence to Judge Dearie under cover of a Feb. 26 handwritten note to the courtroom deputy, Ellen Mulqueen.

"Dear Ellie," Mr. Elgindy opened his note to Ms. Mulqueen.

"The enclosed letter is for Judge Dearie, and I can assure everyone that none of my attorneys will try to interfere with this one, I promise," Mr. Elgindy wrote, adding a hand-drawn smiley.

It is not clear what prompted either the comment or the smiley.

Evidently Mr. Elgindy had plans to send Judge Dearie some further correspondence, too.

"Lastly, I want you to also know that I'm about to send him my actual letter that I'd like him to please read & consider prior to my sentencing," Mr. Elgindy wrote to Ms. Mulqueen. "I am just waiting on a photograph to get here so I can send it all at once."
Mr. Elgindy amicably closed out his brief covering note to Ms. Mulqueen.

"Thank you very much & warmest regards," he wrote.

Dear Judge

As noted, Mr. Elgindy's communication to Judge Dearie was typewritten. The letter to the judge was dated Feb. 27, a day later than the handwritten covering note to Ms. Mulqueen.

The subject of Mr. Elgindy's correspondence to Judge Dearie was a sealed sidebar discussion that had taken place on Dec. 16, 2004.

"I would like to ask that your Honor please read this side-bar a couple of times before considering what I write here," Mr. Elgindy wrote to Judge Dearie.

It is not clear just what prompted Mr. Elgindy to ask the judge to read the brief sidebar a couple of times before considering his comments.

The sidebar

As indicated in the trial transcript, former Assistant United States Attorney Kenneth Breen requested the subsequently sealed sidebar. Mr. Breen led the prosecution of Mr. Elgindy before moving on to private practice as a white collar criminal defence lawyer.

The sealed sidebar transcript reproduced by Mr. Elgindy indicates that prosecutor Mr. Breen wanted to discuss something that had arisen during a hallway discussion with John Sten, a former lawyer with the enforcement division of the U.S. Securities and Exchange Commission (SEC). Mr. Sten was to be called as a witness for the defence during the Dec. 16, 2004, trial session.

To provide some context for what follows, Stockwatch readers may recall that at Mr. Elgindy's 2002 bail hearing Mr. Breen made the stunning and widely reported allegation that the short seller might have had foreknowledge of the Sept. 11, 2001, terrorist attacks on the World Trade Center and attempted to profit from that information. No such charges were ever laid against Mr. Elgindy.

"I was just talking to Mr. Sten in the hallway and something came up," Mr. Breen told Judge Dearie on Dec. 16, 2004, prefacing another stunning allegation.

In presenting the sealed sidebar discussion, Mr. Elgindy employs bolding, underlining and uppercase lettering to add emphasis, but only the uppercase lettering is reproduced below.

"Mr. Sten brought something up that he hasn't mentioned before & I thought that he should and I bring it up to WARN everyone and I told Mr. Sten to not say what he told me under any circumstances, but apparently, as part of an investigation he worked on (while at the SEC), there was some accusations that a SHORT-SELLING group that included Mr. Elgindy, might have known about and traded ahead of the FIRST BOMBING of the World Trade Center," Mr. Breen reportedly told the court.

"I told him not to mention it," the prosecutor added.

"The '93?" Mr. Royer's defence lawyer Lawrence Gerzog queried.

"The date, that's what he told me," Mr. Breen reportedly said. "He knows not to go into it. I told him not to answer any question, just stop to turn to you, your Honor, but this is ... "

"Fake a heart attack," Judge Dearie said.

"I'll take a heart attack," remarked Mr. Breen.

"If he says it, I'll have a heart attack so, okay," said the judge.

"We'll all get to enjoy our holidays," defence lawyer Mr. Berke reportedly chimed in. "My joke was ... "

"Scrambling to explain," Mr. Gerzog interjected.

"Stop, my joke was that there would have to be a mistrial and the trial would end," Mr. Berke said.

"Is that to clarify?" asked Judge Dearie, perhaps jesting.

Liar, liar, liar

Mr. Elgindy clearly remains very troubled by that sidebar discussion and, until now, secret stunning allegation of Dec. 16, 2004.

Mr. Elgindy goes on to level some rather pointed allegations of his own in his Feb. 27, 2006, letter to Judge Dearie, claiming that prosecutor Mr. Breen, defence witness Mr. Sten and the government's key witness Mr. Cleveland all lied during the trial.

"Mr. Breen wasn't just the only person to accuse me in front of one Judge that I may have known about the 9/11 attacks, he now comes before you Honor and casually links me to to (sic) very first bombings of the World Trade Centers in NY back in February of 1993," Mr. Elgindy wrote.

"He mentions that this is brand new information that he has never mentioned before," Mr. Elgindy continued. "Mr. Breen told you that he had instructed Sten to never mention this under any circumstances.

"I submit that this makes no sense, Mr. Sten was our witness, he was called to testify about my role in Conectysis matter.

"Mr. Breen stressed strongly his admonishment to Sten to stay clear of this topic.

"I suppose that this implies that it would have been my attorney who might of (sic) veered off into this area.

"I respectfully submit your Honor that every single word that came out of Mr. Breen was a lie.

"His actions do not ring true, for example, the part when he told you that he instructed Mr. Sten that the instant he is asked a question whose reply triggers an answer that involves the 1993 1st World Trade Center bombings, he is to instantly stop talking and turn to face you.

"Who exactly did Mr. Breen think would be capable of asking such a question other than himself?

"Mr. Sten's statements that he was part of such an investigation that actually included me, is a complete fabrication and lie.

"They both give you information that cannot possibly be true.

"My first short sale of my entire life occurred in October of 1995, over two full years after those sad events.

"In fact, I had never been in the news and nobody had ever heard of me.

"Furthermore, anyone who did know me, knew that I was certainly not a short seller.

"Mr. Sten went out of his way, much like Cleveland did, to fabricate a complete false set of events, however, Mr. Sten did it maliciously with nothing to gain.

"If there is anything indicative of the viciousness of the environment to prejudice me, this is it.

"Mr. Sten committed a crime with this lie and nobody told me about it, not even my own lawyers.

"Had I known, it's probable that I would have never put him on the stand.

"His subsequent false 'accomplice' testimony was devastating to my entire SEC based defense.

"In the end, we have another absolutly (sic) horrific allegation, once again I was tied to another act of terror and murder of innocent people, accusations that were tossed around so casually, I see my own lawyers cracking jokes about it.

"Apparantly (sic) they have all gotten desensitized to it, however, it has not become less hurtfull (sic), less humiliating, or less degrading.

"What was the point of putting this on the record? "The only reason I submit was to tell you, your Honor.

"It may have been Mr. Sten's lie, but it was dramatically delivered by the man who it benefitted (sic) the most.

"Thank you very much for your time."

Rebuked and rebuffed

It is not clear how much time Judge Dearie gave to a consideration of Mr. Elgindy's letter. From the judge's own handwritten note and order, however, it is clear that he was not pleased with the correspondence.

"Clerk to forward, by fax, to all counsel," Judge Dearie wrote on Feb. 28.

"The Court is very displeased with the familiar tone of this letter and now directs the Clerk to return all communications from Mr. Elgindy," Judge Dearie ordered.

Damage control

On March 16, while submitting five additional letters of support for Mr. Elgindy in anticipation of the March 22 sentencing, Mr. Berke filed an obvious attempt at damage control with the court.

"In addition, we write at Mr. Elgindy's request to offer his apologies for his recent correspondence to Your Honor and your Courtroom Deputy, Ms. Mulqueen," Mr. Berke wrote. "Mr. Elgindy fully understands that, going forward, he is not to communicate with the Court or its staff directly and that any correspondence he wishes to have the Court consider is to be filed through counsel.

"To put the matter in some context, Mr. Elgindy has been studying the trial transcript in preparing for sentencing and appeal and is particularly upset regarding the accusation made outside his presence during a sealed side-bar colloquy concerning the testimony of former SEC attorney John Sten.

"As Mr. Elgindy's recent correspondence to the Court indicates, Mr. Elgindy adamantly denies the inflammatory and prejudicial accusation or suggestion that he might have had pre-knowledge of the bombing of the World Trade Center in 1993, citing, among other things, the fact that he did not begin short-selling until 1995.

"Mr. Elgindy wanted to let the Court know that he denies in the strongest possible terms what Mr. Sten reported to the government, and that he feels particularly troubled by what he perceives as an attempt to unfairly and without foundation link him not just to the 9/11 attacks in 2001 but to the first World Trade Center attacks in 1993 as well.

"Mr. Elgindy had for some time requested that we bring his views of this side-bar colloquy to the Court's attention.

"We did in fact allude to the matter, but did not discuss it in detail (in large part because it was under seal), in footnote 34 on pp. 53-54 of our Reply Sentencing Memorandum, dated February 24, 2006."

Mr. Berke did indeed "allude to the matter" in a footnote.

"Based on a sealed side-bar colloquy in which the government attributed a certain statement to Mr. Sten, Mr. Elgindy submits that there is substantial additional evidence calling in doubt Mr. Sten's credibility and in particular his testimony that Mr. Elgindy was an 'accomplice' in the Conectisys fraud," the defence lawyer wrote in a footnote in the reply memorandum.

As of March 20, the court file does not show any further correspondence from Mr. Elgindy submitted through counsel.

Stockwatch will continue to follow developments.

Comments regarding this article may be sent to lwebb@stockwatch.com.

(More information regarding the Elgindy case is available in Stockwatch articles published under the symbol *TSX on May 22, 23, 24, 28 and 29; June 3, 4, 6 and 17; July 18, 2002; March 25, 2003; Oct. 3, 2005; Jan. 26 and 27; and March 3 and 16, 2006.)