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Analysis

May 30, 2002

What did 'Tony' know on September 10?

THE question on every Wall Streeter’s lips this week is this: what did Amr Ibrahim Elgindy — otherwise known as “Tony” — know on September 10? The answer, according to Elgindy’s lawyers, is nothing. Or, at least, nothing about the forthcoming terrorist attacks in New York and Washington.

But federal prosecutors want to know why Elgindy, an Egyptian-born Muslim, tried to liquidate his children’s $300,000 (£204,000) trust account on September 10, while informing his stockbroker that the Dow Jones, then at 9,600, would fall to below 3,000.

It may all sound preposterous, but Elgindy’s life on Wall Street is already pretty far-fetched. The 34-year-old stock adviser is being held without bond on charges of racketeering, extortion and obstruction of justice. The prosecution claims he bribed FBI agents to give him details of confidential fraud investigations into public companies. The case is unprecedented.

Elgindy allegedly used the FBI information to short-sell stock in companies — this means borrowing stock and then selling it, in the hope of buying it back at a lower price and pocketing the difference.

So far the judge in the case has disregarded the prosecution’s rather flaky claims about September 11, although the FBI says it is interested in looking further into the matter. After all, the FBI has yet to find anyone who had advance knowledge of the attacks.

Investigators are also interested in why Elgindy transferred more than $700,000 to Lebanon in the months after the September 11 atrocity. Prosecutors say he may be planning to bolt from the US. They want to seize his fleet of cars, including a Rolls-Royce, a Jaguar and a Humvee military vehicle.

However, Elgindy criticised the September 11 attacks on his website. “We must seek, find, apprehend and destroy those who are responsible for this terrorist attack,” he said. He also asked the public to refrain from short-selling stock in US companies. The court case will continue on June 6. If found guilty, Elgindy could face a maximum penalty of 65 years in prison.

  • It is good to see the FBI is doing its best to bring down apartment rental prices in New York. It is distributing notices warning residents that their new neighbour may be a member of al-Qaeda and that his suspiciously bulky hi-fi unit may be a small thermo-nuclear device. This comes at a time when apartment vacancies throughout the US have surged from 3.2 per cent to 5.7 per cent. Real estate brokers are not happy. New York’s massive food delivery industry is also not particularly pleased. Even Manhattan’s most upmarket restaurants deliver a large percentage of their food every night.

    The immigrants who deliver most of the food in New York are paid a pittance but can make a reasonable wage on tips. However, their incomes are dropping sharply as lobby staff ban them from entering swanky apartment buildings.

  • The Carry On Accounting farce being played out on Wall Street continued yesterday when Peregrine Systems, a scandal-ridden software company, fired KPMG as its auditor after just one month.

    And why was KPMG fired? Because Peregrine realised that the revenues that sparked a scandal over its dubious book-keeping had come from deals with KPMG’s former consulting division.

    I wish I could have been at the meeting when the penny dropped at KPMG. “So why exactly are Peregrine in trouble?” I can imagine an intern piping up. “Well, son, they booked lots of questionable sales to, erm, it says here . . . KPMG Consulting. Oh dear.”

    The numbers involved are hardly the kind that you would expect KPMG to have forgotten about. Some $35 million of the $100 million of revenues that Peregrine is restating came from transactions with the former consulting arm of the accounting firm (KPMG Consulting is now an independent public company). “Since these were KPMG Consulting transactions, KPMG was unaware of them at the time of our engagement by Peregrine as its independent auditors,” a KPMG spokesman explains.

    It is also pretty amazing that Peregrine could not remember where the $35 million of revenues had come from. After all, it is a clear breach of America’s (admittedly limited) auditor independence guidelines for a company to hire a book-keeping firm that has generated revenues for its business.

    By the way, a state-of-the-art document shredder will be awarded to the reader who can guess the identity of Peregrine’s previous auditor.

  • After the warning last month by Warren Buffett, America’s second richest man, that a “$1 trillion nuclear event” in Manhattan was inevitable, it’s good to see that the insurance industry has got its priorities right.

    Maurice “Hank” Greenberg, chief executive of insurance group AIG, has spent the past few weeks in a bizarre dispute over whether death by “autoerotic asphyxiation” is technically suicide and therefore not covered by an employer’s accidental injury and death insurance policy. As many as 1,200 people a year die from “AeA” (as insurers call it). This means it could cost the industry all of $500,000 annually.

    So far, Hank is losing his battle to have AeA excluded from policies.

  • I feel rather ill after reading a survey from the University of Arizona. According to the survey (funded by Clorox, an office cleaning firm), office desks in New York city are the dirtiest of all in America, home to ten times more bacteria than desks in, say, San Francisco. My own desk, apparently, contains 20,961 germs per square inch. That is 400 times more than the average lavatory seat. I think I will skip lunch at the office.
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