Silver Trader Armstrong Seeks to Get Out of Jail After 6 Years
By David Glovin
January 24, 2006

Martin Armstrong, the former silver trader accused of a $700 million fraud, today asked a court to free him after serving six years in connection with a crime for which he was never tried.

Armstrong's lawyer appeared in a federal appeals court in Manhattan this morning to argue his client is being wrongly imprisoned for failing to surrender assets including $14.9 million in gold bars and coins. Armstrong told a judge in related civil cases that he didn't have anything to turn over. The judge didn't believe him and imprisoned Armstrong for not obeying.

``Where's the sanity in this?'' said Armstrong, 56, in a Nov. 30 interview at the Metropolitan Correctional Center in lower Manhattan, where he shares a 75-square foot cell with an accused contract killer. ``No one else is treated this way.''

A ruling by the U.S. 2nd Circuit Court of Appeals in Manhattan on his request may lead to a decision defining the limits on a judge's power to jail defendants for contempt, said Armstrong's attorney, Thomas Sjoblom. No one has ever spent more time behind bars for civil contempt of a federal court order, Sjoblom said.

U.S. District Judge Richard Owen jailed Armstrong for contempt on Jan. 14, 2000. He is presiding over civil suits filed against Armstrong by the Securities and Exchange Commission and the Commodity Futures Trading Commission.

Armstrong appeared in Manhattan federal court on Oct. 7, 1999, to answer the criminal charges. Brian Coad, the prosecutor in charge of Armstrong's criminal case before it was postponed by his jailing, said Armstrong would probably face as little as six- and-a-half years in prison were he to be convicted.

Judicial Discretion

The judge in the criminal case has the discretion to decide whether Armstrong will get any credit for time served should he be convicted of the criminal charges.

Sjoblom, a partner at New York's Chadbourne & Parke, said the U.S. government is increasingly using rulings in civil matters to gain an edge in criminal cases. He plans to ask the court to block the government from doing it in Armstrong's case.

Armstrong built a reputation on his theory that economic cycles recur over centuries. Operating from an office overlooking Tokyo's Imperial Palace, the New Jersey-based firm grew to manage as much as $3 billion for Japanese investors. The firm no longer operates.

The contempt ruling that put Armstrong behind bars was sought by Alan Cohen, the court-appointed receiver for Armstrong's firm, Princeton Economics International Ltd. Cohen, who's trying to recover assets for the firm's investors, says the law doesn't limit incarceration for contempt to 18 months, as Armstrong claims.

``There's no question he had all these assets,'' Cohen's lawyer, Martin Glenn, said in an interview. ``This $15 million, when and if it's recovered, will be distributed to investors who were bilked.''

Huge Losses

U.S. authorities said Armstrong hid huge trading losses by using funds from new investors to pay off old ones. On Sept. 13, 1999, the SEC and CFTC sued Princeton Economics, and prosecutors filed criminal fraud charges against Armstrong in New York.

Owen appointed a receiver and froze the firm's assets. The judge in the criminal case freed Armstrong on $5 million bail. Owen didn't return a call seeking comment.

Months later, Owen issued the first of several contempt rulings against Armstrong. The judge said Armstrong would stay in jail unless he surrenders 102 gold bars, 699 gold coins, a bust of Julius Caesar and a computer once stored in his New Jersey home -- or until he explains what happened to them. Armstrong said he doesn't have them.

``To honestly survive I do not think about the outside world,'' said Armstrong, his skin sallow, his hair almost gone. ``Once you've stepped into this place, the rules that exist in the outside world don't exist.''

Manhattan Prison

The 12-story Manhattan prison where Armstrong is housed serves mostly as a detention center for defendants awaiting trial or sentencing. Unlike federal prison camps where white-collar criminals such as Martha Stewart were incarcerated, the Metropolitan Correctional Center is designed to hold gang members, drug dealers, mobsters and terrorists for short stays.

Prisoners are guarded at all times. Concrete cellblocks echo when remote-controlled locks clang shut.

Awakened at 6 a.m., Armstrong, who wears a blue jumpsuit, said he spends his days in the law library, where he's churned out thousands of pages of legal briefs for himself and other inmates. In one case, he said he filed a request by a fellow inmate who wanted permission to donate a kidney to his father.

There's a bunk bed, a stool, a table, and a toilet in his cell. Armstrong said he went months without his blood pressure medicine and rarely uses the rooftop recreation deck because it reeks of urine. He said he's witnessed guards mistreating prisoners and watched a 23-year-old stab himself in the neck. An inmate once held a razor to his throat, he said.

Metropolitan Correctional Center spokesman Chris Liwag declined to comment.

Criminal Trial

Prosecutors say Armstrong has ``continually delayed'' his criminal trial by claiming he's not ready. Armstrong says the center won't grant him access to documents to prepare. He's clashed often with his court-appointed counsel and said recently that he may defend himself when the case comes to trial.

In December 2001, Republic New York Corp., a unit of HSBC Holdings Plc, pleaded guilty to charges it helped Armstrong swindle Japanese clients and agreed to pay them $606 million in restitution.

The case is Armstrong v. Guccione, 04-5448, 2nd U.S. Circuit Court of Appeals.

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