U.S. v. Royer

• Decision Date: 17 December 2008
• Docket Number: Docket No. 06-5165(con).,Docket No. 06-4081-cr(Lead).,Docket No. 06-4087-cr(con).
• Citation: 549 F.3d 886
• Parties: UNITED STATES of America, Appellee, v. Jeffrey ROYER and Amr I Elgindy, also known as Anthony Pacific, also known as Anthony Elgindy, also known as Herbert Manny Velasco, also known as Heriberto Manny Velazco, also known as Tony Elgindy, Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

549 F.3d 886

UNITED STATES of America, Appellee, v. Jeffrey ROYER and Amr I Elgindy, also known as Anthony Pacific, also known as Anthony Elgindy, also known as Herbert Manny Velasco, also known as Heriberto Manny Velazco, also known as Tony Elgindy, Defendants-Appellants.

Docket No. 06-4081-cr(Lead).

Docket No. 06-5165(con).

Docket No. 06-4087-cr(con).

United States Court of Appeals, Second Circuit.

Argued: September 3, 2008.

Decided: December 17, 2008.

Joshua L. Dratel (Meredith Heller, on the brief), Law Office of Joshua L. Dratel, New York, NY, for Defendant-Appellant Elgindy.

Lawrence D. Gerzog, New York, NY, for Defendant-Appellant Royer.

John A. Nathanson, Assistant United States Attorney (David C. James and Michael J. Goldberger, Assistant United States Attorneys, on the brief) for Roslynn R. Mauskopf, United States Attorney for the Eastern District of New York, Brooklyn, NY, for Appellee.

Before: SACK and KATZMANN, Circuit Judges, and RAKOFF, District Judge.^*

RAKOFF, District Judge:

Amr I. Elgindy and Jeffrey Royer appeal from judgments of conviction entered in the United States District Court for the Eastern District of New York (Dearie, J.) following a twelve-week jury trial.

Elgindy was convicted by the jury of racketeering conspiracy in violation of 18 U.S.C. § 1962(c), securities fraud conspiracy in violation of 18 U.S.C. § 371, five substantive counts of securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff, one count of conspiracy to commit extortion and one substantive count of extortion, both in violation of 18 U.S.C. § 1951(a), and two counts of wire fraud in violation of 18 U.S.C. § 1343.¹ In addition, Elgindy pleaded guilty to a separate indictment (combined with the jury verdict for purposes of sentencing and entry of the judgment here appealed), which charged him with making false statements to representatives of the Transportation Safety Authority in violation of 18 U.S.C. § 1001 and with committing an offense while on pretrial release in violation of 18 U.S.C. § 3147. Elgindy was sentenced principally to a term of 135 months' imprisonment.

Royer was convicted by the jury of racketeering conspiracy in violation of 18 U.S.C. § 1962(c), securities fraud conspiracy in violation of 18 U.S.C. § 371, four substantive counts of securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff, conspiracy to obstruct justice in violation of 18 U.S.C. § 371, obstruction of justice in violation of 18 U.S.C. § 1503, and witness tampering in violation of 18 U.S.C. § 1512(b)(3).² Royer was sentenced principally to a term of 72 months' imprisonment.

On appeal, Elgindy and Royer jointly and severally raise a host of issues, but the only ones that merit discussion relate to venue, the adequacy of the jury instructions and legal theories underlying the securities fraud and wire fraud counts, the admission of evidence related to the events of September 11, 2001 ("9/11"), and the calculation of the sentences. We construe the facts most favorably to the Government.

In 1998, Elgindy founded a company called Pacific Equity Investigations that administered two websites, one that was publicly accessible with the address "www.InsideTruth.com" ("the InsideTruth site") and one that was available only to paying subscribers with the address "www.AnthonyPacific.com" ("the AP site").³ The InsideTruth site presented itself as a research tool that sought to uncover and reveal negative information about publicly-traded companies. The AP site sought to profit from these revelations by providing its subscribers with recommendations about which stocks to "short."⁴

In 2000, through a co-conspirator named Derrick Cleveland (who testified for the Government at trial), Elgindy began receiving misappropriated information from co-defendant Jeffrey Royer, who was then a Special Agent of the Federal Bureau of Investigation ("FBI") in Oklahoma City. In the early summer of 2000, Royer informed Cleveland of the existence of an ongoing government investigation of a company called Broadband Wireless ("BBAN"). Cleveland passed the information on to Elgindy, who then profited by shorting shares of BBAN. As a result of this success, Elgindy solicited Cleveland to relay further such confidential law enforcement information from Royer. Eventually, Royer began passing information directly to Elgindy, as well as passing information through Cleveland.

As the scheme evolved, Royer, who was assigned to the FBI's "white collar crime" unit, would obtain confidential information by performing searches in the FBI's Automated Case Support computer database and in the criminal history database maintained by the National Crime Information Center, as well as by contacting personnel of the Securities and Exchange Commission ("SEC") and asking them to perform searches in the SEC's confidential Name Relationship Search Index database. Royer would convey the misappropriated information to Elgindy, who would in turn convey the gist of it to subscribers to the AP site and instruct the AP site members to short the stock but not yet release the information to the public. Then, when Elgindy gave the signal, the AP site members would use the InsideTruth site and other media to disseminate the misappropriated information to the general public, and thereby profit from the resulting drop in the stock's price. Elgindy kept close control over his AP site subscribers and even threatened to exclude them from the site if they failed to follow his trading instructions.

In addition, Elgindy himself traded on the misappropriated information, sometimes even in advance of when he released it to the AP members or when he directed them to trade on its basis (a practice called "front running"). Elgindy and Royer also manipulated prices in the relevant securities by orchestrating trades by AP site subscribers in thinly traded stocks.

In January 2002, both Royer and Cleveland began working for Elgindy at his San Diego office. Even though Royer had now left the FBI, he continued to unlawfully obtain confidential law enforcement information from his girlfriend, Lynn Wingate, who still worked for the FBI, and from a friend named Michael Mitchell, who was a police officer in Gallup, New Mexico.

Elgindy also used the unlawfully obtained information for the purpose of extortion. Specifically, after Royer provided Elgindy with information that Paul Brown, the CEO of a company called Nuclear Solutions ("NSOL"), had previously been convicted of a felony drug charge but that the conviction had been expunged, Elgindy posted the information on the AP site, describing Brown, inaccurately, as a "three time felon." Elgindy and the AP site members then heavily shorted NSOL stock, causing its price to decline. Thereupon, Elgindy informed Brown that he and the AP site members would leave Brown alone only on the condition that Brown give Elgindy a discounted block of NSOL stock to cover their short positions. Brown signed an agreement with Troy Peters (one of Elgindy's accomplices who pled guilty to participation in the extortion conspiracy), pursuant to which Peters' company would purportedly provide investment banking services to NSOL in exchange for stock in the company. No such services were ever provided, however, and the agreement merely served as a cover to transfer shares to Elgindy and others.⁵

Elgindy further used his connection with Royer to learn whether he himself was under investigation. On several occasions prior to September 11, 2001, Elgindy requested, both directly and through Cleveland, that Royer find out whether Elgindy was the target of any ongoing investigation. Thereafter, in late September 2001, Royer learned that Elgindy was a subject of a government investigation in the Eastern District of New York into individuals who had made significant securities trades immediately prior to 9/11. Elgindy drew the investigators' attention because he had made contributions to a charity called "Mercy USA" that the investigators believed had links to terrorist organizations and because, on September 10, 2001, he had attempted to liquidate his children's investment accounts. Royer passed at least some of this information on to Elgindy.

The government also introduced evidence that Elgindy subsequently traveled to Lebanon without the permission of his probation officer in November 2001,⁶ arranged to buy an apartment there, and transferred money to a Lebanese bank account. He also asked Royer to write a letter to the District Court of the Northern District of Texas recommending that Elgindy's term of supervised release be terminated early.

Shortly before Royer left the FBI in late 2001, he was interviewed about Elgindy. In the course of this interview, he falsely stated that, although Elgindy had offered him a job, he did not plan to work for Elgindy until the FBI investigation had been concluded. He also falsely stated that he had never provided confidential law enforcement information to Elgindy.

As mentioned, Royer, after leaving the FBI, continued to obtain confidential information from, among others, Michael Mitchell, whom Royer asked to run searches in law enforcement databases. Royer falsely told Mitchell that the searches were relevant to work on continuing FBI investigations. After Royer was arrested, he contacted Mitchell and told him repeatedly that he had told the FBI that he had only asked Mitchell to run one search. Mitchell understood Royer to be asking him to lie to the FBI if he was interviewed about the multiple searches he had performed for Royer.

A grand jury in the Eastern District of New York returned an indictment against Elgindy, Royer, and others in May 2002, and a second superseding indictment in September 2004. On April 17, 2004, after he had been arrested and released on bail, Elgindy went to MacArthur Airport on Long Island and tried to board a plane with false identification. He was traveling under the name "Herbert Manny Velasco"...