Armstrong Petition For Rehearing - Armstrong Economics
No. 19-392In theSupreme Court of the United StatesMARTIN A. ARMSTRONG,v.Petitioner,SECURITIES AND EXCHANGE COMMISSION,UNITED STATES COMMODITY FUTURES TRADINGCOMMISSION, TANCRED SCHIAVONI, in hiscapacity as temporary receiver, andTHE UNITED STATES OF AMERICA,Respondents.On Petition for Writ of Certiorari to theUnited States Court of Appealsfor the Second CircuitPETITION FOR REHEARINGMARTIN A. ARMSTRONG1300 I Street, NWSuite 400EWashington, DC 20005(202) 729-4125armstrongpetition@gmail.comPro SeApril 3, 2020
TABLE OF CONTENTSTABLE OF AUTHORITIES . iiPETITION FOR REHEARING . 1REASONSFORGRANTINGRECONSIDERATION . 1I.An Equity Proceeding Cannot Compromise AParallel Criminal Proceeding. 1II. The Government Knew Armstrong Did NotTake Money It Ordered Him To “Pay Back” . 6III. The Government Threatened ContinuedContempt Unless Armstrong Pled ToConspiracy . 9CONCLUSION . 12
iiTABLE OF AUTHORITIESCasesAntoniaks v. Armstrong,No. 18-1263 (E.D. Pa. filed Mar. 27, 2018) . 9Grupo Mexicano de Desarrollo, S.Av. All. Bond Fund, Inc.,527 U.S. 308 (1999). 2In re Luma Camera Service,157 F.2d 951 (2d Cir. 1946) . 11In re Sawyer,124 U.S. 200 (1888). 2Luis v. United States,136 S. Ct. 1083 (2016). 2Maggio v. Zeitz,333 U.S. 56 (1948). 11SEC v. HealthSouth Corp.,261 F. Supp. 2d 1298 (N.D. Ala. 2003). 3, 12SEC v. PEIL,84 F. Supp. 2d 443 (S.D.N.Y. 2000) . 1Suess v. Noble,31 F. 85 (C.C.S.D. Iowa 1887) . 2United States v. Gonzalez-Lopez,548 U.S. 140 (2006). 2United States v. Razmilovic,419 F.3d 134 (2d Cir. 2005) . 3Other AuthoritiesDeclaration of Oliver Brown, Armstrong v.SEC, No. 09-1260 (D.C. Cir. Aug. 26, 2011) . 9Dominick Dunne, Death in Monaco, VanityFair (Dec. 2000), https://bit.ly/343fQ3J . 5
iiiJudgment in a Criminal Case §F (Schedule ofPayments), United States v. Armstrong,No. 99-cr-997 (S.D.N.Y. Apr. 10, 2007) . 6Mem. of Agreement, SEC v. PEIL,No. 99-cv-9667 (S.D.N.Y. Oct. 15, 1999) . 11Order, United States v. Armstrong,No. 99-cr-997 (S.D.N.Y. Apr. 24, 2007) . 6Transcript of Conversation Between MartinA. Armstrong and Bobby Williamson(Sept. 7, 1999) . 6Transcript of Conversation Between MartinA. Armstrong and Maria Toczloski(Aug. 1999) . 6Transcript of Proceedings, SEC v. PEIL,No. 99-cv-9667 (S.D.N.Y. Jan. 7, 2002) . 8Transcript of Proceedings, SEC v. PEIL,No. 99-cv-9667 (S.D.N.Y. June 24, 2005) . 3Transcript of Proceedings, United States v.Armstrong, No. 99-cr-997(S.D.N.Y. Aug. 17, 2006). 10Transcript of Proceedings, United Statesv. Ludwig, No. 04-cr-742 (S.D.N.Y. 2004) . 4Transcript of Proceedings, United Statesv. Rogers, No. 04-cr-708(S.D.N.Y. July 27, 2004) . 4Transcript of Proceedings, United States v.Republic N.Y. Secs. Corp., No. 01-cr-1180(S.D.N.Y. Dec. 11, 2001) . 5
PETITION FOR REHEARINGPrior to the decision below, no federal court hadever allowed a district court presiding over an equityproceeding to invade a parallel criminal proceeding inanother district court—let alone to do so in a way thatstripped the defendant in a criminal case of hisfundamental constitutional rights. If such a practicewere countenanced, not only would a criminaldefendant’s right to Brady material go by the wayside,but his Sixth Amendment right to counsel of choiceand Fifth Amendment right to due process—especiallyin the context of parallel governmental contemptproceedings—would be rendered worthless. Becausethat is the basic consequence of the decision below, theCourt should reconsider its denial of certiorari andgrant the petition to address the flagrantconstitutional violations visited on Armstrong in theseproceedings.REASONS FOR GRANTINGRECONSIDERATIONI.An Equity Proceeding Cannot CompromiseA Parallel Criminal Proceeding.After Armstrong self-surrendered to federalofficers on September 13, 1999, in connection withtrumped-up allegations of criminal securities fraud,the SEC and CFTC initiated civil injunctive actionspremised on the same basic facts as the criminalindictment (which was not filed until after Armstrongself-surrendered). In January 2000, the district courtpresiding over those equity proceedings (Judge Owen)ordered that funds paid to Armstrong’s criminalcounsel of choice be clawed back and turned over to areceiver. SEC v. PEIL, 84 F. Supp. 2d 443 (S.D.N.Y.
22000). That order had an obvious consequence: It leftArmstrong unable to use funds—not shown to betainted—to secure counsel of choice in his criminaldefense. The civil equity court’s interference withArmstrong’s criminal defense thus violated not onlyArmstrong’s right to counsel of choice, but his right todue process. See United States v. Gonzalez-Lopez, 548U.S. 140 (2006) (structural error; no prejudice as toeffectiveness of counsel need be shown); Luis v. UnitedStates, 136 S. Ct. 1083 (2016). That fundamentalconstitutional deprivation cannot be countenanced.1. From the days of the English High Court ofChancery to now, no court has ever authorized such apractice. The equity jurisdiction of the federal courtsis limited to that which was exercised by the EnglishCourt of Chancery at the time the Constitution wasadopted and the Judiciary Act of 1789 was enacted.Grupo Mexicano de Desarrollo, S.A. v. All. Bond Fund,Inc., 527 U.S. 308, 318-19 (1999).And thatjurisdiction does not extend to interfering withcriminal proceedings—let alone doing so in a way thatflouts criminal defendants’ constitutional rights.Since at least the 1880s, the federal courts haverecognized that a court of equity has no jurisdiction tointerfere with a criminal case. See, e.g., In re Sawyer,124 U.S. 200, 210 (1888) (“[A] court of equity has nojurisdiction over the prosecution, the punishment, orthe pardon of crimes or misdemeanors.”); Suess v.Noble, 31 F. 855, 856-57 (C.C.S.D. Iowa 1887)(“Courts of equity deal only with civil and propertyrights. They have no jurisdiction to give relief incriminal cases.”). That is for a simple reason: If sucha practice by courts of equity were permitted to
3continue, then a criminal defendant’s fundamentalrights to due process and criminal counsel of choicewould both be a nullity.2. Yet that is precisely what transpired here. Tryas he might, Armstrong was rebuffed at every turn,and ultimately was prohibited from raising this issuein earnest in either of the proceedings below. See Pet.for Writ of Certiorari at 1-2; Reply Brief for Pet’r at 23. The Constitution does not—and cannot—toleratethis sort of government manipulation. See SEC v.HealthSouth Corp., 261 F. Supp. 2d 1298, 1326 (N.D.Ala. 2003).Making matters worse, the “civil” confinement towhich Armstrong was subjected ultimately wasextended at the request of the criminal prosecutors.Indeed, the government did not even try to hide itsmachinations. In June 2005, after the guilty pleas byRepublic New York Securities Corporation (RNYSC)and the officers in its Futures Division, the prosecutorhandling Armstrong’s criminal case told the districtjudge handling the civil proceedings (Judge Owen)that Armstrong’s “civil” contempt needed to continuebecause the United States Attorney’s Office for theSouthern District of New York (USAO) planned toseek contribution from Armstrong in the criminal caseto reimburse HSBC. See Transcript of Proceedings,SEC v. PEIL, No. 99-cv-9667 (S.D.N.Y. June 24, 2005).The USAO was thus using the civil proceedings tofurther its criminal remedies.That sort of governmental misuse of process isblatantly unconstitutional. See, e.g., United States v.Razmilovic, 419 F.3d 134 (2d Cir. 2005) (criminalauthorities cannot utilize the civil side of the court in
4a parallel proceedings to acquire additional assets orto exact further criminal restitution). It was aviolation of due process to engage in such practices.3. The government has sought to justify itsconstitutional violations by insisting that this case isone of fraud of the highest magnitude—that thePrinceton Notes (the instruments that formed thebasis of its case) exceeded 3 billion. Even if that weretrue, however, it would be of no moment; evenperpetrators of large frauds are entitled toconstitutional rights.But the government hasoverplayed its hand.The government failed to mention that 2.4billion in notes had already been redeemed before thiscase commenced; that another 520 million in futures,options, and foreign-exchange trading losses hadoccurred at RNYSC’s Philadelphia Futures Division 1;or that a further 42 million in commissions were paidto RNYSC, an affiliate of Republic National Bank(Republic). The government likewise failed to pointUnbeknownst to Armstrong and RNYSC, the president ofRepublic’s Philadelphia Futures Division allowed the allocationof losing trades to Armstrong’s accounts—conduct for which thatofficer later pled guilty. Transcript of Proceedings at 28, UnitedStates v. Rogers, No. 04-cr-708 (S.D.N.Y. July 27, 2004).Importantly, Armstrong was not involved in those practices. SeeTranscript of Proceedings at 15, United States v. Ludwig, No. 04cr-742 (S.D.N.Y. 2004). In fact, a tape recording that surfaced in2012 or 2013 states that RNYSC had been using the money ofPEIL (one of Armstrong’s civil codefendants) rather than its owncapital. The Futures Division later acknowledged its movementof debits among accounts. See Transcript of ConversationBetween Martin A. Armstrong and Maria Toczlowski (Aug.1999).1
5out that, when HSBC sought to acquire Republic in1999, its owner lowered the price to restore 450million—which he was thought to have taken, seeDominick Dunne, Death in Monaco, Vanity Fair (Dec.2000), https://bit.ly/343fQ3J—or that HSBC paid theUnited States 606 million in restitution in 2002 inconnection with its role.Add it all up, and according to the USAO itself,the victims of the Princeton Notes “fraud” were madewhole. See Transcript of Proceedings, United States v.Republic N.Y. Secs. Corp., No. 01-cr-1180 (S.D.N.Y.Dec. 11, 2001). 2 In fact, although the governmentplaced the exchange-rate risk on HSBC between thetime of its plea and sentencing, see Transcript ofProceedings at 10-11, United States v. Republic N.Y.Secs. Corp, No. 01-cr-1180 (S.D.N.Y. Dec. 11, 2001),the payment by HSBC actually netted it a 400million windfall, given the change in exchange ratesbetween Japanese yen and the U.S. dollar.So, whatever one might say about the financialconduct underlying the charges, the indisputable factis that the “victims” of the “fraud” were made whole (ifnot more than whole). 3 In fact, the CFTC had tried toExcluded from the restitution were Japanese companies thathad made profits on their notes for which no restitution wasowed. Also excluded was any company that had engaged in fraudor crimes in Japan. See Transcript of Proceedings at 13-14,United States v. Republic N.Y. Secs. Corp., No. 01-cr-1180(S.D.N.Y. Dec. 11, 2001).23 The receiver also made an interim 56.6-million distributionto the investors. Together with HSBC’s payment, Armstrong’srestitution was therefore deemed satisfied. See Judgment in aCriminal Case §F (Schedule of Payments), United States v.Armstrong, No. 99-cr-997 (S.D.N.Y. Apr. 10, 2007).
6claim 35 million more. 4 And even after the criminaljudgment was entered, when the government tried toextract further restitution from Armstrong, thedistrict court denied it. 5 Yet the government even nowtries to hang Armstrong for the misdeeds of others.II. The Government Knew Armstrong Did NotTake Money It Ordered Him To “Pay Back.”The government knew all along that Armstrongdid not take the money. Indeed, in tape-recordedconversations that were found after Armstrong wasreleased from prison, Armstrong can be heardquestioning an officer at RNYSC about who took themoney, how RNYSC could be using the Princetonnotes as capital instead of its own money, and who atRNYSC was moving funds among accounts to coverdebits. See Transcript of Conversation BetweenMartin A. Armstrong and Bobby Williamson (Sept. 7,1999) (Williamson said “I know it is not you” whendiscussing futures trades and movement of moneybetween accounts to cover debits; the FuturesDivision was lying to Armstrong.); see also Transcriptof Conversation Between Martin A. Armstrong andMaria Toczloski (Aug. 1999). Yet the government hadIn December 2004, the CFTC showed up unannounced inArmstrong’s cell without his counsel present and demanded thatArmstrong relinquish the 35 million remaining as a penalty. Herefused.45 Order, United States v. Armstrong, No. 99-cr-997 (S.D.N.Y.Apr. 24, 2007) (“The court will not change the Judgement in theway the [government] urges because the creditors [investors] arenot entitled to be paid twice.”).
7withheld this evidence at the time of the criminalproceedings. 6The government was well aware of that fact.Indeed, in a reverse proffer session in April 2000,Assistant United States Attorney (AUSA) RichardOwens told Armstrong that the government knew hedid not take the money. But, given the interest of theJapanese government in Cresvale-Tokyo, a registeredbroker-dealer in Japan and a later affiliate of PEIL inJapan, 7 as well as the high-profile nature of this caseand the merger of Republic National Bank (the oldestLebanese private bank) with HSBC (the largest AsianAt the outset of the proceedings, the SEC Receiver and theJoint Provisional Liquidators (JPLs) overseeing the demise ofPEIL in the Turks & Caicos entered into a Memorandum ofAgreement (MOA) in October 1999, approved by the district court(Judge Owen), in which it was agreed that any exculpatoryevidence would be withheld from Armstrong. By blocking therelease of exculpatory evidence, a court sitting in equity presidingover the SEC and CFTC cases again overrode Armstrong’sconstitutional rights to Brady material in the criminal case.6Cresvale International, Ltd (Cresvale), a Cayman Islandscorporation, operated a registered broker-dealer in Japan, calledCresvale-Tokyo, a subsidiary of Cresvale Far East, organizedunder the laws of Hong Kong as a securities broker-dealer. Inthe 1990s, PEIL began providing Cresvale-Tokyo withforecasting information, which Cresvale repackaged andtranslated into Japanese. In 1995, PEIL was requested by theJapanese government to purchase Cresvale-Tokyo as a bail-outfrom French Banc Palais when that bank was experiencingfinancial difficulty. PEIL did so with approval of the Japanesegovernment. Cresvale later became the entity about which theJapanese government (FSA) in August 1999 reported the 1billion in note problems to both RNYSC and Federal ReserveBank of New York, which provoked the instant case.7
8bank in the world), the government stated that itwould not drop the charges.The SEC receiver, emboldened by the USAO’sdecision not to drop the charges against Armstrong,told the district court presiding over the civilenforcement matter that there was possibly yetanother fraud that predated the allegations in theSEC complaint and the criminal indictment regardingRNYSC. Despite RNYSC’s guilty plea and payment ofrestitution, the receiver implored the district court(Judge Owen) that “[l]osses that occurred [prior toRepublic] are not embraced within the restitution byHSBC,” for which “there is no description ofcriminal liability.” Transcript of Proceedings at 17,SEC v. PEIL, No. 99-cv-9667 (S.D.N.Y. Jan. 7, 2002).On that ground, the district court was encouraged tocontinue Armstrong’s civil contempt, even thoughthere were no allegations of such conduct in thecriminal case, 8 nor were there any such allegations ofearlier misconduct in the SEC/CFTC civil enforcementcases.The contempt ran another five years without anyattempt by the government to amend the original SECand CFTC complaints. The district court simply reliedon the representations of the receiver of a possibleearlier fraud, though no proof was ever offered ormade. The continued contempt—and the confinement8 AUSA Owens stated to the criminal court that losses thatoccurred earlier (1992-1995) and even losses that occurred after1995 but prior to the false NAV letters “are not embraced withinthe restitution by HSBC.” Transcript of Proceedings, SEC v.PEIL, No. 99-cv-9667 (S.D.N.Y. Jan. 7, 2002).
9that followed—was a violation of due process underthe Fifth Amendment. 9III. The Government Threatened ContinuedContempt Unless Armstrong Pled ToConspiracy.An official at New York City’s MetropolitanCorrectional Center (MCC) advised Armstrong that,because the government lacked evidence to convicthim, the MCC had been instructed to hold Armstrong“until he relented, gave in or simply broke down andadmitted to the crimes he was accused of.”Declaration of Oliver Brown at 4, Armstrong v. SEC,No. 09-1260 (D.C. Cir. Aug. 26, 2011). 10 That isprecisely what transpired.In 2006, the government falsified charges ofconduct inside the MCC regarding a wall vent as abasis to place Armstrong in solitary confinement(called the “SHU,” a droll acronym for “special housingunit”) for eight days. 11The government againThe irony of it all is that the continued civil contempt hadnothing to do with Armstrong secreting away any money, butrather a missing coin collection worth 1.3 million, gold bars andbasalt bust of Julius Caesar. Those coins have now surfaced inanother case in Philadelphia in which a coin shop owner claimsthey are his. Antoniaks v. Armstrong, No. 18-1263 (E.D. Pa. filedMar. 27, 2018).9Oliver Brown, an MCC official, came forward with thisinformation and signed a declaration in 2011—on the verge ofArmstrong’s release from prison—11 years after the contemptbegan. See Declaration of Oliver Brown, Armstrong v. SEC, No.09-1260 (D.C. Cir. Aug. 26, 2011).1011 The same MCC officer who advised that Armstrong had tobe held until he broke or relented, see n.10, supra, has stated thatthere was no basis for such fictitious confinement, and the MCC
10restricted Armstrong’s access to his CJA criminalcounsel and removed his trial preparation materialsfrom his cell in the SHU. The USAO threatened himwith continued confinement in the SHU for civilcontempt in the parallel SEC/CFTC cases—includingduring his criminal trial—if he refused to plead guilty,which he had already refused twice, and thenthreatened 135 years in jail unless he pled. This wasa clear abuse of process.Ultimately, facing the prospect of being returnedindefinitely to the SHU, Armstrong agreed to plead toa conspiracy with Republic and to a five-year sentence,if he were permitted to seek credit for the seven yearshe had already served. 12 In his allocution, which wasscripted by the USAO and which Armstrong wasforced to read en haec verba, Armstrong stated that“among the things that were represented to investorsby my agents in Japan” was that investor monieswould be held in segregated accounts at RNYSC andwould not be available to Republic for its own benefit.At no point was Armstrong required to say that hetook any money. Transcript of Proceedings at 20,United States v. Armstrong, No. 99-cr-997 (S.D.N.Y.Aug. 17, 2006).As part of that plea, Armstrong also was requiredto waive his right to Brady material—includingexculpatory material that had been withheld from himfailed to adhere to all protocols to support it, including lack ofphotographs and written report.12 The district court refused to grant credit for the seven yearsin contempt. Thus, Armstrong served twelve years for a crimecarrying a mandatory sentence of five years.
11throughout the entire proceedings based on the MOA.Section 13(b) of the MOA, signed in October 1999 onemonth after the criminal complaint, provided that“[t]he Receiver and the JPLs acknowledge and agreethat they shall not and they shall direct theirrespective agents and representatives not to provideany non-public information regarding [PEIL orCresvale] to Martin Armstrong .” The district courtpresiding over the equity proceeding (Judge Owen)had approved the MOA on October 15, 1999. Mem. ofAgreement, SEC v. PEIL, No. 99-cv-9667 (S.D.N.Y.),Dkt. 38. Thus, the equity court blocked production ofexculpatory information to a criminal defendant. Bythese and other baleful practices, the governmentabused its powers throughout this poignant saga.Sparing no indignity, it trampled repeatedly onArmstrong’s constitutional rights.The Second Circuit has recognized that acontempt “may not, via a fiction, be substituted for acriminal pro[ceeding] so as to deprive a man of a basicconstitutional right .” In re Luma Camera Service,157 F.2d 951, 953-54 (2d Cir. 1946), vacated on othergrounds by Maggio v. Zeitz, 333 U.S. 56 (1948); seeMaggio, 333 U.S. at 80 n.1 (Black, J., concurring) (“Wewould note, too, that one consequence of the fiction isthat the respondent may be twice punished for thesame offense.”). 13It was a violation of Armstrong’s rights to dueprocess to use the threat of continued civil contempt toforce a guilty plea.13See n.12, supra.
12CONCLUSIONWhere the government controls both the civil andcriminal proceedings, the need for strict adherence toand protection of a defendant’s constitutional rightsmust be paramount. See, e.g., HealthSouth, 261 F.Supp. 2d at 1326. The practices the governmentemployed in this case amount to flagrant violations ofthe Constitution, and cannot be countenanced. Forthe foregoing reasons, the Court should grant thispetition and grant the petition for writ of certiorari.Respectfully submitted,Martin A. Armstrong1300 I Street, NWSuite 400EWashington, DC 20005(202) 729-4125armstrongpetition@gmail.comApril 3, 2020Pro Se
CERTIFICATEPursuant Supreme Court Rule 44, I hereby certifythat the petition for reconsideration filed herewith hasbeen presented in good faith and not for delay. Itraises issues of intervening circumstances that cameto light after my release from prison and also presentsother substantial grounds not previously presented inthe initial petition for writ of certiorari.Dated: April 3, 2020
No. 19-392 In the Supreme Court of the United States _ MARTIN A.ARMSTRONG, Petitioner, v. SECURITIES AND EXCHANGE COMMISSION, UNITED STATES COMMODITY FUTURES T RADING COMMISSION, T ANCRED SCHIAVONI, in his capacity as temporary receiver, and T HE UNITED STATES OF AMERICA, . Respondents. _ On Petition for Writ
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