One Step Ahead

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An online newspaper reporting the issues of Securities Fraud

STOCKGATE TODAY
Lack of Regulatory Transparency – The Darker Side – November 19, 2004

Dave Patch

In a sordid tale of a short seller, rogue FBI agents, and possible regulatory conspiracy a Federal Prosecutor in New York is laying out its case against Anthony Elgindy for stock manipulation and extortion. Over the past 10 days the prosecutor has had Derrick Cleveland on the stand testifying to the intricacies between the various parties. At the center of the twisted tale are Mr. Elgindy and his web site www.anthonypacific.com.

Derrick Cleveland, who has already plead guilty to securities fraud, has outlined not only players involved in the illegal shorting scheme but has testified on behalf of the web site logs that have been entered into evidence in the trial. The value to the site was critical as is evidence below:

“The idea was that "we could go long, then give (the information) to Elgindy and with the power of Elgindy’s site, we could crush (the company) and make money on the long and the short side," Cleveland told the court.”

The companies Mr. Cleveland is referencing are those being identified to them by former FBI Agent Jeffrey Royer who is also under indictment for his role in the stock manipulation and securities fraud.

But is there more to this story that is not being told?

In January 2001 the National Association of Securities Dealers (NASD) fined John Fiero $1,000,000 and barred him from the industry for illegal shorting and stock manipulation violations. Fiero was considered to be responsible for the demise of Hanover Sterling and the bankruptcy of Clearing Firm Adler Coleman due to his short selling abuses and extortion. Fiero was also considered to be a player in US Organized Crime operations as detailed in a Businessweek article labeled “The Mob on Wall Street”.

As is the standard within the American judicial system, with every conviction there can be an appeal process and Fiero appealed his NASD conviction. What happened to Fiero during this appeal process may be disturbing. According to Anthony Elgindy, the agency that convicted him (NASD) gave him an office and set up shop for him to continue his trading.

Below are October 1, 2001 transcripts from the www.anthonypacific.com web site. The same type of transcript the Federal Prosecutor is using today against Elgindy in his trial. Reports are that thousands of pages of these transcripts have been entered into evidence.

10/01/01 transcripts;

[12:19] anthony>>want to hear the most ironic thing in the world

[12:20] aplongman>>thank you ERTS up to my ears

[12:20] peter>>yes

[12:20] steviee>>sure

[12:20] steviee>>sure

[12:20[ anthony>>the NASD which barred and banned FSCO and fined him 1,000,000 bucks, gave him machines and a room to trade from at their offices

[12:20] anthony>>FSCO is trading from NASD offices

[12:21] nico>>Nasdaq is a scam

[12:21] JP_Trader>>did FSCO pay the fine??

[12:21] peter>>new anti-shorting thread http://www.siliconinvestor.com/stocktalk/subject.gsp? subjectid=51782

[12:21] Jetups>>anthony, it’s no more bizarre than our early financial support of Bin Laden years ago

[12:21] anthony>>he doesn’t have to,

[12:21] anthony>>its under appeal

[12:21] JP_Trader>>k

[12:22] anthony>>jetups bond isn’t anything like that

[12:22] JP_Trader>>Tony how is Bond holding up??

…..

[12:24] Jetups>>I didn’t say anything about Bond, oh well

……

[12:24] zeez>>Tony, say hi! to bond if you talk to him.

[12:24] anthony>>I will

[12:24] anthony>>He would love to be on but he only has twop machines and he can’t make room for chat

……

[12:25] hope it’s working out ok for bond

http://www.anthonypacific.com/logs/quicktrades/011001.htm


Testimony of Derrick Cleveland yesterday in Court reported that John Fiero was in fact a member of the AnthonyPacific web site. That provides a solid link between short seller Anthony Elgindy and short seller John Fiero. Reading the transcript above, could “Bond” actually be John Fiero as it is all in line with the conversation taking place about Fiero?

I have sought answers to the allegations made by Elgindy in this transcript and have, to date, received none other than advice to not trust all of what Elgindy had to say on his site. In fairness to the NASD, this could simply be posturing by Elgindy and in fact not reality. Without the transparency of the NASD we may never know and thus with this document it is the NASD that needs to show verification that this is in fact fiction. Maybe the NASD can answer these questions at the same time.

If the NASD is about shutting down fraud, why has the NASD failed on taking any enforcement actions against the co-conspirators in the SEC’s conviction of Rhino Advisors for stock manipulation (Ref: SEC vs. Rhino Advisors and Thomas Badian, February 2003)? Within the transcripts of the conviction it is clear that Rhino was working with members of the Industry to conduct this manipulation, why no further actions?

If the NASD was about investor protection, why has the SEC identified that 4% of all present public companies fall into a category of threshold security whereby settlement failures are excessive and potentially abusive? These settlement failures can only come about via the short selling activities such as what Elgindy and Fiero were famous for. Where is the NASD in protecting the investors in these companies identified?

The NASD and SEC both want to be considered regulators for the Investors. It is actually the mandate of their mission statement. To date, their lack of concern and lack of action as it pertains to the small investors of these small companies would indicate otherwise. Elgindy claims that it was the FBI and Regulators that used him to police the scam companies out there. Question is who identified the scams and what about the investors caught in the middle?

The SEC and NASD have repeatedly failed to protect innocent investors abused in scam as well as clean companies alike because they have categorized them all together as scams. To the regulators the Micro-caps are a haven for fraud and thus every company in the micro-caps is a scam. What proof do they have – None other than their own prejudice!

The fact is innocent investors were caught up in the purchase of both good and scam companies that are not simply relegated to the micro-caps. Worldcom, Enron, etc…were scams on a higher market; does that make all NYSE companies scams because of a select few? The Regulators do not believe so and thus take each as independent cases. For the micro-caps that approach is lost as regulators have resorted to living behind a common generalization; all micro-caps are scams and thus investors deserve to be abused! That generalization simply creates MORE FRAUD against the innocent.

It is time the SEC and NASD are confronted regarding their roles in market players such as Fiero and Elgindy. Elgindy and Fiero required a network, including market participants and regulators, to succeed in their fraudulent acts. We know members of the Industry are involved and now the Elgindy website documentation certainly raises questions as to whether the regulators were also involved. Were the regulators allowing illegal short sellers to control the policing of our markets and allowed the member firms to violate securities laws in support of them?

For more on this issue please visit the Host site at www.investigatethesec.com .

Copyright 2004