United States District Court, S.D. New York
October 14, 2004.
Martin A. Armstrong, Petitioner,
Joseph R. Guccione, U.S. Marshal for the Southern District of New York and Marvin D. Morrison, Warden, Metropolitan Correctional Center, Respondents.
The opinion of the court was delivered by: RICHARD OWEN, Senior District Judge
OPINION AND ORDER
Today, October 14, 2004, the Clerk's Office of the Second
Circuit Court of Appeals requested this Court for a formal
written order denying bail pending a decision by this Court on
the merits of a petition for a writ of habeas corpus recently
filed before me, to be argued on November 3, 2004. The denial of
bail is recited in the transcript of September 23, 2004, relevant
pages being annexed to the Notice of Appeal.
At this point, bail was denied as it is not a consideration
here, since Armstrong's several years' and present
confinement is for contempt of an order endeavoring to compel him
to turn over to the receiver of his companies some $15 million of
corporate assets of which a sufficient showing has been made he
has personal possession to possibly satisfy claims of $1 billion
by defrauded note holders. This is all set forth in detail in an
opinion of this Court, right on this subject, written just last
week (although in another context), which in totality is
incorporated here by reference and annexed as attachment A
SECURITIES AND EXCHANGE
OPINION AND ORDER
against 99 Civ. 9667 (RO)
PRINCETON ECONOMICS INTERNATIONAL, LTD.,
PRINCETON GLOBAL MANAGEMENT, LTD., AND
MARTIN A. ARMSTRONG,
Helene T. Glotzer, Stephanie D. Shuler, Securities and Exchange
Commission, Attorneys for Plaintiff.
Alan M. Cohen, Tancred Schiavoni, Martin Glenn, O'Melveny &
Myers, LLP, Attorneys for Receiver.
Stephen Jay Obie, Commodity Futures Trading Commission.
Thomas V. Sjoblom, Benjamin R. Ogletree Chadbourne & Parke,
LLP, Attorneys for Defendant Armstrong. and David Cooper, Steven
Martin Armstrong, Defendant Pro Se.
OWEN, District Judge:
In September 1999, defendant Martin Armstrong, the then CEO of
Princeton Economics, et al., was indicted and he and his
corporations proceeded against civilly, on charges of a Ponzi
scheme, under which investors were defrauded in the area of $1
billion dollars. Alan M. Cohen as the receiver of his
corporations was appointed by Judge Kaplan. Shortly thereafter an
order was issued by me in this Court directing Armstrong to turn over
to the receiver certain corporate assets roughly worth $15
million which had been purchased with corporate money. These
consisted in substantial part of almost $1 million of gold bars,
some $7 or $8 million of valuable coins, and an historic bust of
Julius Caesar, all of which Armstrong had taken into and was
keeping in his personal possession. He did not comply with that
order and in January 2000, Armstrong was found in civil contempt
and placed in the New York Metropolitan Correctional Center to
compel compliance. He, however, has never complied with that
order and remains confined in the MCC to this day though over the
past four and a half years he has been repeatedly brought before
this Court in an effort to induce compliance but without success.
Armstrong has appealed to the Court of Appeals innumerable
times after many of these District Court appearances, endeavoring
to vacate the civil contempt confinement order but also without
success. The Court of Appeals has declined this in all of its
numerous opinions along the way, stating for example on March 18,
Armstrong had the burden of producing evidence to
show that he cannot comply with the order. The
district court observed that Armstrong has come
forward with none. On appeal, Armstrong does not
challenge that finding (or cite any new evidence).
Significantly, while the coercive effect of the
initial contempt order decreased as the expiration
date drew near, the July 6, 2001 order contains no
expiration date. With the dismissal of the instant
appeal. Armstrong will for the first time be faced
with the prospect of indefinite confinement.
At the beginning of this very summer, June 3, 2004, I had
Armstrong produced before me inquiring into his state of mind as
to compliance with the turnover order and at that time stated to
him as the transcript reads: Mr. Armstrong, you have now sent to me for the
Circuit an affirmance of your continuing detention
here, dated 26 February 2004, for Judges Walker,
Calabresi and Cabranes, which, among other things,
they observe that you do not challenge the district
court's finding or cite to any new evidence that
would suggest to the district court that you could
not comply with the turnover order. That is a quote.
And they affirmed the discretion of this court to
continue to trust that at some point the $15 million
of materials would be turned over. This is against a
Court of Appeals review of March 18th of 2002.
I have gone back through about seven or eight
transcripts looking at what you have been telling me.
January 7th of 2002, at that point stating to me
that, quote, I spent two years in prison supposedly
because I am the director of the institute. February
22nd, among other things, you say, page 51, you
have never been given an inventory of what was to be
produced, among a number of other things. *fn1
June 19 is the Mexican standoff quote on your part.
Quote, you [referring to the Court] will not change
your opinion on my Fifth Amendment and I cannot
comply, so I will have to go to trial and at that
point we will have to deal with the real issues.
September 23rd is the interesting day where we
got on the record finally through Mr. Cooper [one of
his many lawyers] acknowledging that in the Fifth
Amendment context you did in fact say that you do not
have to turn over anything. November 7th of 2003,
you reiterate again, I have never received an
inventory of what was produced or what is claimed to
be missing. I don't know what I have to turn over,
page 39. When you were asked about are you going to
turn anything over, at the prior time you had said
that you just don't want to. You said, well, my
position is, quote, I haven't made a decision.
December 15, 2003, you took the position you didn't
have to turn it over because, quote, I don't believe
it is constitutional, page 41.
. . . February 23rd of 2004, when I made the
observation on which we would see $15 million worth
of coins in [sic, "and"?] gold bars, your answer to
me was, perhaps if we go to trial and I can prove my
innocence, we might find something very important as
to who is actually covering up for whom in this
Now, I have gone through all of this, obviously the
teedying [sic, I doubtless said "tedium"] of the
Court of looking it up, the teedying of of everybody in the room having to listen to me
recite it, because you have now been in going on four
MR. ARMSTRONG: Four and a half years.
THE COURT: As a United States district judge, I find
it just incredibly distressing that with all of that
review and with the Second Circuit's review and their
observations and my observations and your various
positions, I don't have to, I don't want to, I have
no need to do it, I have the Fifth Amendment of the
Constitution let's put is this way. It bothered me,
as one of my children once said, that the United
States District Court can, in my opinion, be played
with as you have done with us in this period of time.
It seems to me perfectly clear that you do have the
power to turn over this material, which is not
inconsequential, as the Court of Appeals has said,
and, yes, a lot of time has passed, and, yes, it is a
lot of money, and I do feel it is there to be gotten
and that you are engaged in your, quote, Mexican
standoff with us. I am continuing to stand
Now, I observe to you again the opportunity is here
to comply with this. As you know, and we all know in
this room, Mr. Kirwan has no real record, whatever
you gave him, anything, Mr. Setogawa, you say you put
a million dollars of gold bars in the trunk of his
rented limousine and he drove off in New Jersey, with
not one single scrap of paper you gave him any of
that. So the Court of Appeals has, in my view,
observed with the same sense of astonished skepticism
that you continue to maintain that these are defenses
to a perfectly obvious turnover.
At this point I felt it was appropriate to bring you
over since the Court of Appeals sent me most
recently, which was given to me on the 7th of May
saying we deny the appeal, to give you another
opportunity so that nobody can contend that you are
not being given every chance to comply.
So I put to you again, are you going to or are you
not going to?
MR. ARMSTRONG: Your Honor, I think that the opinion
of the Court of Appeals, your Honor, throughout this
case has always declined to accept jurisdiction. They
have never reached the merits of anything, and in
this last order they directed that a habeas corpus be
filed to create a record for them to review. Now Mr.
Sjoblom's firm, Chadbourne & Parke, is in the process
of doing that.
I had Martin Armstrong brought before me again just a few weeks
ago, September 23, 2004.
That hearing was quite brief on this subject:
THE COURT: There has never been a statement to this
Court or them or anybody else that you could not
comply; it just was that you wouldn't comply. That is
really where we are at.
You have brought a habeas petition through counsel,
and I will get to that, I suppose, in a little bit
here. I take it your position, as far as a production
of things under the contempt order, your position is
exactly the same as before, which is not that you
can't but that you don't have to and you don't want
to. That is really where I continue to see you are
MR. ARMSTRONG: Your Honor, I cannot find any case
post indictment where anybody
THE COURT: I am not looking for any cases. I am
looking for your state of mind. Does that continue to
be your state of mind?
MR. ARMSTRONG: My state of mind is that I stand upon
my constitutional rights.
THE COURT: OK.
At this point, on October 1, 2004, one week after the above,
Armstrong wrote a letter to Judge McKenna who is presiding over
his criminal case which states:
By now you are probably aware that on September 22
Judge Richard Owen reviewed the contempt and
continued it indefinitely and thereby has already
decided the habeas by default. There is no
realistic possibility of my release by Judge Owen
ever. It is unlikely that the Second Circuit will be
in a position to rule until next fall when I am about
to begin my (7th) year of imprisonment.
This erroneous blanket attack is what occasions this opinion as a
followup to the hearing before me on September 23, 2004 quoted
As a sort of preface, I note that the Court of Appeals on March
18, 2002, wrote with understandable concern, humanity and hope, "[T]here is surely a
limit of how long someone will choose to stay in jail, even for
$14.9 million, but we see no basis for rejecting the district
court's finding that Armstrong's incarceration continues to serve
a coercive purpose."*fn2
And two years after the above, as recently as last February
just a few months ago the Court of Appeals (2/24/04) again
visited these issues on the most recent appeal by Armstrong, and
stated in pertinent part:
In January 29, 2003 and June 19, 2003 hearings, the
district court determined that, notwithstanding the
additional passage of time, the civil contempt order
continued to have a coercive effect on
defendant-appellant Martin Armstrong. Specifically,
it found that Armstrong still had produced no
evidence that he had attempted to or was unable to
comply with the turn over order.
* * *
As we stated in Armstrong III, "Armstrong had the
burden of producing evidence to show that he cannot
comply with the order," 284 F.3d at 406; see also
Huber v. Marine Midland Bank, 51 F.3d 6, 10 (2d
Cir. 1995) ("the alleged contemnor's burden is to
establish his inability [to comply] clearly, plainly
and unmistakably"). And, on this appeal, Armstrong
does not challenge the district court's finding or
cite to any new evidence that would have suggested to
the district court that he could not comply with the
turn-over order. Rather, he argues that the length of
his confinement (now nearing four years) combined
with his repeated declarations that he will not
comply with the turn-over order, compel the
conclusion that, in fact, he will never comply; thus
he maintains that the contempt order has lost its
* * * In sum, the record reveals that the district court
continues to "conscientious[ly] consider"
Armstrong's individual circumstances, Simkin,
715 F.2d at 37, and has heeded our requirement that it
make "a careful reassessment of [the] coercive
potential" of the contempt order. Armstrong III
284 F.3d at 406. Indeed, at each hearing, it has
considered all of the relevant factors and determined
that there was a "realistic possibility that
Armstrong w[ould] comply," Id. citing Simkin,
715 F.2d at 37.
We conclude, therefore, that the district court did
not abuse its discretion by continuing Armstrong's
confinement and we dismiss for lack of appellate
jurisdiction without prejudice to any remedy under §
2241 or 2255. We base this decision, in part, on our
believe that a ruling squarely addressing the merits
of Armstrong's arguments will streamline the ultimate
resolution of this case.
* * *
However, we need not decide the status of such a
habeas remedy today because Armstrong has not yet
petitioned the district court directly for habeas
corpus relief on the basis of his Fifth Amendment or
28 U.S.C. 1826 arguments nor developed a record
below. Accordingly, those issues are not, at this
juncture, properly before us. See Fed.R. App. P.
The above quote is now particularly apt given the subsequent
filing and present pendency before me of just such a habeas
corpus petition prepared by one of his attorneys which is to be
heard on November 3, 2004. Accordingly, I am of the view that
certainly as of this moment, Armstrong's incarceration retains
some amount of coercive force. Whether a fair assessment of the
habeas petition filed at the Court of Appeals' suggestion and the
government's response which has not yet been filed ends this
or continues to leave the pending order with some assessable
remaining "coercive potential", 284 F.3rd at 407, remains to be
seen, but does not require a District Court's consideration of
these issues until such time has come.