7-year contempt jailing ends but Armstrong is sentenced to 5 more

Section:

Jailed 7 Years for Contempt,
Adviser Is Headed for Prison

By Michael de la Merced
The New York Times
Saturday, April 28, 2007

http://www.nytimes.com/2007/04/28/business/28financier.html?

A federal judge lifted a 7-year-old civil contempt sanction on the financial adviser Martin A. Armstrong yesterday, allowing him to begin serving a five-year sentence for conspiracy to commit fraud.

The decision by Judge P. Kevin Castel of Federal District Court in Manhattan ends one of the longest-running cases of civil contempt in American legal history. It will finally pry Mr. Armstrong, 57, from the Metropolitan Correctional Center in Lower Manhattan, where he has been held since January 2000.

"The incarceration for contempt is over," Mr. Armstrong's lawyer, Thomas V. Sjoblom, said after the hearing.

By the time Mr. Armstrong is released, he will have served 12 years for orchestrating what prosecutors called a $3 billion Ponzi scheme through his investment fund, Princeton Economics International.

"Those who believe you are innocent or a victim are the latest victims of Mr. Armstrong's fraud," Judge Castel said yesterday. "They haven't done their homework."

Judge Castel left in place the finding that Mr. Armstrong was in contempt but decided that keeping him in jail on that claim had no effect.

"If seven years didn't do it, another two, another three, another five years isn't going to do it either," Mr. Sjoblom said.

Prosecutors may now pursue a criminal contempt sanction against Mr. Armstrong because of his failure to turn over the assets. Mr. Sjoblom said he did not expect that to happen.

The contempt charge stems from both criminal and civil suits filed by the government against Mr. Armstrong in 1999. In 2000 the court-appointed receiver in the civil case demanded the return of various assets, including gold coins and a bust of Julius Caesar, which may have been purchased with money from Mr. Armstrong's investment fund.

When Mr. Armstrong did not produce the assets, as well as documents that were requested by the government, the judge in the case, Richard Owen, ordered him jailed.

Jail terms for civil contempt, unlike those for criminal contempt, are aimed at coercing offenders into cooperating and are not meant as punishment. In most such cases, a person is held for contempt for 18 months at most.

But Judge Owen repeatedly reimposed the jail time, demanding the production of the materials. He was removed from the case by a panel of the United States Court of Appeals for the 2nd Circuit in November after justices decided the case needed "a fresh look by a different pair of eyes."

Last summer, after spending several days in solitary confinement, Mr. Armstrong reached a plea agreement with federal prosecutors. He pleaded guilty to one count of conspiracy in the criminal case, which centered on what prosecutors said was a plan from 1992 to 1999 to hide hundreds of millions of dollars in trading losses.

Earlier this month Mr. Armstrong was sentenced to five years in prison, concluding the government's separate criminal case against him. But in ruling that the civil and criminal matters were separate, the judge in the criminal case chose not to credit Mr. Armstrong with the time already served.

Thus, that sentence would not be carried out until the civil contempt case was resolved.

The Bureau of Prisons will now decide where and when Mr. Armstrong will be assigned for his criminal sentence. He has requested to be sent to Fort Dix, a low-security prison in New Jersey close to his mother.

Yesterday's hearing proved contentious from the start. Judge Castel sparred with Mr. Armstrong's lawyers, scolding them for introducing evidence at the last minute.

At one point Judge Castel argued with Mr. Sjoblom over the defense's attempt to introduce as evidence statements from several individuals. Judge Castel harangued Mr. Sjoblom over the finer points of legal discovery, including the difference between sworn statements and depositions, which allow for cross-examination.

After the hearing Mr. Sjoblom and Tancred V. Schiavoni, a lawyer working for the court-appointed receiver, traded verbal jabs as well.

"You could have gotten your client out of jail seven years ago, but you blew it," Mr. Schiavoni told Mr. Sjoblom.

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