US court rejects ex-trader's 7-year contempt case

By James Vicini

WASHINGTON, Oct 29 (Reuters) - The U.S. Supreme Court rejected on Monday an appeal by former trader and financial adviser Martin Armstrong, who had been jailed for more than seven years for contempt of court.

"This case involves fundamental questions about the power of a federal district court to impose a term of indefinite incarceration as a sanction for civil contempt," his attorneys said in the appeal, asking the Supreme Court to hear the case.

"Armstrong's seven-year detention is virtually unprecedented in American history," they said, arguing his confinement violated the Recalcitrant Witness Statute, the Non-Detention Act and his constitutional due process rights.

Armstrong, the founder of economic forecasting firm Princeton Economics International, was held in a Manhattan jail from January 2000 until April 27, when a federal judge ended the contempt proceeding because it no longer was serving its purpose.

Armstrong was jailed after failing to produce millions of dollars in gold and antiquities related to a civil lawsuit brought by the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission. He long argued that he did not have the items the government was seeking.

In August last year, Armstrong pleaded guilty to a separate criminal charge of conspiracy to commit fraud. At sentencing in April, he was given five years in prison, and the judge said Armstrong would not get credit for the time he already had spent in jail.

In appealing to the Supreme Court, Armstrong's attorneys said the appeals courts are in conflict on whether the Recalcitrant Witness Statute applied to corporate custodians ordered to turn over potentially incriminating evidence.

They said a judge may not imprison someone for more than seven years, when there has been no finding that further incarceration will produce compliance.

The U.S. Justice Department opposed the appeal. It said the U.S. appeals court decision in the case was correct, and did not conflict with any ruling by the Supreme Court or another appeals court.

Department lawyers said Armstrong's case would be a "poor vehicle" for considering his claims because his confinement for civil contempt had ended.