Saturday, January 15, 2005

Elgindy Securities Fraud Trial Coming to a Close

The securities fraud trial of Anthony Elgindy, a well-known market analyst who specializes in shorting stocks, and Jeffrey Royer, a former FBI agent accused of leaking to Elgindy information about ongoing investigations of companies, is nearing its end as the attorneys completed their closing arguments on Friday, Jan. 14. Royer testified that he disclosed the information to Elgindy for law enforcement purposes to develop a source of information on corporate misconduct (see Jan. 4 post "Former FBI Agent Testifies in His Own Defense"). Elgindy did not testify, and has been in custody since last year when he was arrested for trying to leave the country.  According to the government, Elgindy used the information from Royer to short stocks before disclosing the investigations, and to try to extort money from companies in exchange for not disclosing the information to the public.  An article in the New York Times (Jan. 15) describes the closing arguments of the two sides:

Lawyers for the defendants maintained that prosecutors presented an "Alice in Wonderland" view of the evidence, distorting statements and events to bolster their case.

But prosecutors said yesterday that the facts were clear: Mr. Elgindy and Mr. Royer might talk about their ambitions for law enforcement glory but their motives were corrupted by financial gain.

"It was a made-up rationale to hide their true financial motives," the prosecutor, Kenneth Breen, an assistant United States attorney, said. "The relationship with the S.E.C. and the F.B.I. served as a cover story" so that Mr. Elgindy "could pretend to get information - not glean it."

The article notes another interesting defense: venue.  While venue is usually not an issue, in this case the prosecution was brought in the Eastern District of New York (Brooklyn), although Elgindy operated out of San Diego and Royer was assigned to FBI field offices in Oklahoma and New Mexico.  Judicial decisions allow for a jury charge on venue, which is effectively an element of every federal crime, so long as there is some evidence put forward by the defendant to show there is a dispute regarding venue in the district of the prosecution.  [In a shameless bit of cross-promotion, for more information on proof of venue, see Wright, Federal Practice & Procedure: Criminal, Vol. 2, § 307.] (ph)

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