Future Energy eNews
June 10, 2002Emerging Energy Company is One Company of Several Targeted by Two "Rogue" FBI Agents
Since I was interviewed for over an hour for this story by two Wall Street Journal reporters regarding Dr. Paul Brown and Nuclear Solutions (the main company targeted by this scam), I thought the material in the indictment would be made public in this article. Reading the attached indictment makes it clear that two FBI agents, "on administrative leave," and a crooked stock "short-seller" Elgindy, sought to purposely undermine the Nuclear Solutions public image and a few other unnamed companies. Meanwhile, the FBI confidential database that the agents were using also had inaccurate information on Dr. Brown, which makes the scheme seem even more fraudulent. The question may be why an emerging energy company that realistically challenges the administration's Yucca Mountain storage plan would be targeted by FBI agents who appear to be risking their careers for a few bucks. (Maybe chief counsel Coleen Rowley would be interested in this mysterious plot.) No mention of Nuclear Solutions or Brown is made in this article sent to me by the reporter, which probably is in print by now. - TV
IN THE MONEY: Stock Scheme May Have Had More Targets
06/07/2002
Dow Jones News Service
(Copyright (c) 2002, Dow Jones & Company, Inc.)
A Dow Jones Newswires Column
NEW YORK -(Dow Jones)- An alleged stock-fraud scheme that targeted six
companies and led to the arrests of two federal investigators and a
well-known short seller may have had more companies as potential targets.
How many more companies than the original six mentioned in the federal
indictment handed down late last month in Brooklyn, N.Y., isn't known. But
testimony at a bail hearing earlier this week indicated that at least one
defendant was looking for more information on 10 individuals or companies.
And there is talk in the short-selling community that the same defendant - a
former federal law enforcement officer - may have tried to peddle his
services to other investors. His lawyer declined comment.
As reported, short-seller Anthony Elgindy and two associates were arrested
in the case, as were Jeffrey Royer, a former Federal Bureau of Investigation
agent, and Lynn Wingate, currently on administrative leave from the FBI.
Royer and Wingate were charged with supplying Elgindy confidential
information from FBI databases that he and others used to pressure stock
prices of companies they had already shorted.
In addition, the indictment alleged, the information was used to extort
stock from the target companies. Royer left the bureau in December and went
to work with Elgindy in San Diego.
At the bail hearing for former FBI agent Royer earlier this week, a New
Mexico police officer was called to testify. Royer was reincarcerated last
week after prosecutors charged he violated the terms of his initial release
because he had contacted a potential witness in the case - the New Mexico
police officer.
Officer Michael Mitchell told the court he knew Royer from working with him
on a joint law enforcement narcotics task force last year. He testified that
Royer called him this past March and April "no more than 10 times" to run
checks on people. The Gallup, New Mexico, police officer, who isn't charged
in the case, was testifying in court at the request of Brooklyn Assistant
U.S. Attorney Kenneth Breen.
Law enforcement agencies across the country have access to a centralized
computer that contains information on people's criminal backgrounds. It is
this same kind of information that Royer had allegedly accessed and passed
along to Elgindy that is at the heart of the government's case against him.
Mitchell testified that Royer told him he needed the database searches
because of unfinished FBI business and also for his new line of work as a
private investigator.
During the court hearing, Mitchell said Royer asked him to do some
background checks on people, including past arrests. On one occasion,
Mitchell said he provided Royer with information about an unnamed person's
previous drug conviction in Florida. The officer, who said he ran searches
in the National Crime Information Center Database, didn't say what names
Royer asked him to check.
However, people familiar with the matter said one person who Royer was
looking for information about was Michael Zapetis, a large investor in a
Boca Raton-financial startup company called Investco Inc.
Zapetis was arrested in 1982 on drug smuggling charges. He was sentenced to
15 years in prison but the sentence was later amended, and he ended up
serving just eight months. Zapetis and his relationship with Investco was
explored in a Dow Jones Newswires column in early April. Additional columns
about Investco explored an acquisition Investco said was key to its growth
strategy but which never took place. And a third column explored the
involvement of Investco's chief executive in the famous "Mob on Wall Street"
case in the late 1990s. He received immunity for testimony against a
defendant in the case.
Investco, its chief executive officer Joseph Lents and First International
Finance Corp. (FIFC), a company controlled by Zapetis, were charged with
violating securities laws by the Securities and Exchange Commission in May.
Elgindy mentioned Zapetis' previous drug conviction in several messages to
subscribers of anthonypacific.com, one of his Websites, in April. Based
primarily on Zepetis' previous conviction, Elgindy recommended to short sell
Investco on April 4.
During his testimony this week, police officer Mitchell said that he usually
relayed the information requested by Royer by telephone and, on one
occasion, by fax, "from my office to his office in San Diego."
Brooklyn Assistant U.S. Attorney Breen last week said Royer attempted to
tamper with a witness in the case when he called Mitchell shortly after his
release on May 23.
Mitchell said he stopped providing information to Royer in April after he
developed a "bad feeling about him." "At that time, I decided I didn't have
to have that association," Mitchell told Breen.
Under cross examination by Lawrence Gerzog, Royer's lawyer, Mitchell said he
didn't know that Royer was using the information for securities trading.
In addition to Mitchell, Royer also contacted FBI special agent Vincent
Sanchez on May 24, in what the prosecution says was an effort to learn more
about the nature of the evidence gathered against him and agent Wingate.
Later, when asked why Royer called the FBI agent, Gerzog said "it's not
clear." Gerzog added that the phone call was not important because he would
have access to all of the evidence anyway during the discovery process of
the case.
Royer and Wingate have pleaded not guilty. Egindy's two associates, Derrick
Cleveland and Troy Peters, are out on bail and have yet to plead in the
case. Elgindy remains incarcerated in San Diego. On Tuesday, he agreed to be
moved to New York to face charges. A lawyer for Elgindy said the short
seller would likely arrive in New York next week.
-By Carol S. Remond, Dow Jones Newswires; 201-938-2074;
carol.remond@dowjones.com
Copyright © 2000 Dow Jones & Company, Inc.
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