CORPORATE CRIME REPORTER

Martin Armstrong: Not Convicted, but in Prison for Six Years
20 Corporate Crime Reporter 4(1), January 17, 2006

Martin Armstrong has been charged with a crime.

But he has not been convicted.

Nor has he even been tried.

Nonetheless, Armstrong has been a prisoner at the Metropolitan Correctional Center in Manhattan for six years.

Why?

Because he didn’t comply with a court order to turn over $15 million in gold bars, coins – and a bust of Julius Caesar.

It’s called civil contempt of court.

Next Tuesday, lawyers for Martin Armstrong will take it up with the Second Circuit Court of Appeals.

Armstrong’s lawyers are appealing District Court Judge Richard Owen’s denial of Armstrong’s petition for a writ of habeas corpus.

Habeas corpus – literally, you have the body.

Judge Owen has the body.

And Armstrong’s lawyers want to force Owen to let him go.

Not that Armstrong is an innocent man.

It’s just that we don’t know whether he is guilty or not.

Armstrong’s lawyer, Thomas Sjoblom of Chadbourne Parke, will argue the case before the Second Circuit.

Armstrong was charged in 1999 with criminal and civil securities fraud in connection with trading at Armstrong’s firms – Princeton Economics International Ltd. and Princeton Global Management Ltd.

Federal officials charged Armstrong with trading in risky options, even though he told his Japanese investors he would be making secure investments.

The Japanese allegedly lost a boatload.

The Securities and Exchange Commission obtained a freeze on Armstrong’s assets and appointed a receiver over the corporate defendants.

The receiver went to Judge Owen to get Armstrong to turn over the $15 million in corporate assets the receiver alleged Armstrong had in his control.

Armstrong refused.

Judge Owen found Armstrong in contempt of court and jailed him.

That was six years ago this week.

In a brief filed with the Second Circuit, Sjoblom argues that a federal law passed in 1970 sets an 18-month limit on incarceration for civil contempt.

Sjoblom says no federal prisoner that he could find since passage of the 1970 law has spent more than 18 months in a federal prison for civil contempt.

His client has spent six years.

To bypass the 18-month limitation, Judge Owen cited the court’s “general contempt powers.”

Sjoblom is contemptuous of these powers.

And Sjoblom says that under the Fifth Amendment’s protection against self-incrimination, “you cannot put an indicted individual on the stand and say – turn over the fruits of the crime.”

The government argues in its brief – hey, Armstrong was a corporate custodian.

And corporations don’t have Fifth Amendment protections.

So, Armstrong doesn’t have Fifth Amendment protections.

Sjoblom says that’s ridiculous – that once the receiver took control of the assets of the corporations, then Armstrong was no longer a corporate custodian.

And Judge Owen was running the equivalent of a star chamber – do as I say, or I’ll send you to jail.

Does Armstrong have control over the $15 million in goods that Judge Owen wants him to turn over?

“He says he doesn’t,” Sjoblom said.

“But once you have been indicted you cannot be forced to take the stand and explain where the fruits of the crime are – it’s called the star chamber – you torture someone until a person admits,” Sjoblom said. “The Fifth Amendment was adopted to prohibit star chamber actions.”

“Nevertheless, he did take the stand, and he did answer under compulsion by the judge – like star chamber practices – and he said – I don’t know where these things are.”

The receiver, Alan Cohen of O’Melveny & Myers, has filed a brief with the Second Circuit.

Cohen says Armstrong has the golds coins and gold bars and bust of Julius Caesar – and he wants Armstrong to cough them up.

Sjoblom says despite all of the litigation so far, he’s confident – 90 to 100 percent sure – that Armstrong will be set free by either the Second Circuit by the Supreme Court.

Set free so that he can face criminal charges of fraud.

And then civil charges of fraud.

Why the criminal charges first?

“Judge Owen has stayed the civil case pending the criminal case – but he has him in jail in the civil case,” Sjoblom said.

(For a complete transcript of the question/answer format interview with Thomas Sjoblom, see 20 Corporate Crime Reporter 5(8), January 30, 2006, print edition only)

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