Financial adviser Armstrong gets another five years in prison

Jailed Adviser Is Sentenced
and Fined in Fraud Case

By Michael J. de Merced
The New York Times
Wednesday, April 11, 2007

http://www.nytimes.com/2007/04/11/business/11wall.html?_r=1&oref=slogin

Martin A. Armstrong, the financial adviser who has spent seven years in jail on a contempt-of-court charge, was sentenced yesterday to five years in prison for running what prosecutors said was a $3 billion Ponzi scheme.

Judge John F. Keenan of the Federal District Court in Manhattan also ordered Mr. Armstrong, 57, to pay $80 million -- plus one dollar -- in restitution to the fraud victims.

"Every criminal case is a human tragedy," Judge Keenan said at the hearing yesterday. "But yours is particularly sad."

Mr. Armstrong, the founder of Princeton Economics International, has been held in the Metropolitan Correctional Center in Lower Manhattan since January 2000. He has been jailed for contempt of court because he has not produced $15 million in gold and antiquities, as well as documents, stemming from a related civil suit filed by the government. It is one of the longest-running charges of contempt in American legal history.

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.

Ruling that the civil and criminal matters were separate, Judge Keenan chose not to credit Mr. Armstrong with the time he has already served. Instead, Mr. Armstrong will serve out his prison term after the civil case has been completed. A court hearing in the civil case is scheduled for April 27.

David Cooper, one of Mr. Armstrong’s lawyers, said: "This would have been a rational sentence in reasonable circumstances. But something is crazy about the law."

In court yesterday, Mr. Armstrong repeatedly denied that he had deliberately deceived investors. Instead, he blamed others, including the traders who carried out the trades.

"In all honesty, I was too occupied, and I didn't pay enough attention to what some people did," he told Judge Keenan. "I judged people too good."

His contempt charge stems from a related civil lawsuit filed by federal regulators. When he was unable to produce the gold bars and antique coins, as well as documents, that were requested by the government, the judge then overseeing the case, Richard Owen, ordered him jailed.

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 Second Circuit in November.

Mr. Armstrong and his lawyers have said that the contempt charge inhibited his ability to defend himself. With his assets frozen because of the civil case, he has been unable to pay his lawyers.

During yesterday's two-hour hearing, with his mother and two adult children in attendance, Mr. Armstrong and his lawyer combed through the government's presentencing memorandum, raising a score of objections. Judge Keenan, at times leaning back in his chair, his arms behind his head, overruled most of them.

During a 25-minute speech before the court, Mr. Armstrong spoke at length about Japanese investing strategy and the intricacies of investing in Japanese yen. Judge Keenan interrupted him several times, reminding him of how long he had been speaking.

"You're talking about Japanese markets and Japanese law," Judge Keenan said at one point. "You should be talking about yourself."

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