Investor Accused of $1B Fraud By LARRY NEUMEISTER Associated Press Writer NEW YORK (AP) -- Criminal and civil charges were filed against a New Jersey man accused of bilking Japanese investors out of up to $1 billion as he tried to make up for losing hundreds of millions of dollars on risky investments, authorities say.

Martin A. Armstrong, 50, of Maple Shade, N.J., was arrested Monday and released on $5 million bail after an appearance in federal court in Trenton, N.J. A message left at a telephone listed in his name was not immediately returned.

Armstrong allegedly carried out his criminal scheme as the founder and chairman of a Princeton, N.J.-based investment firm, Princeton Economics International Limited.

Since at least 1996, Armstrong managed to sell about $3 billion of so-called ``Princeton Notes'' to foreign investors through Princeton Global Management Limited, a Princeton, N.J., investment fund he controlled that is popular with some large institutional investors in Japan, authorities said.

The promissory notes were supposed to be conservative investments but instead were used as fuel for Armstrong's failing investment prowess, according to a portrait provided by court documents and releases.

He was accused of securities fraud by federal prosecutors and the Securities and Exchange Commission for allegedly swindling investors through the corporations he controlled.

Documents filed in U.S. District Court in Manhattan outlined the scheme through which Armstrong allegedly tried to cover up hundreds of millions of dollars in losses he piled up through his risky trading.

He promised to conservatively invest the proceeds from the note sales in segregated accounts at Republic New York Securities Corp., a registered broker-dealer headquartered in New York, authorities said.

Instead of protecting the money, Armstrong co-mingled the money in a Princeton Global account at Republic, prosecutors said.

After losing hundreds of millions of dollars, Armstrong then tried to cover up the financial disaster by misrepresenting investment results and concealing trading losses, according to court papers.

The trouble began in earnest for Armstrong when he racked up about a half billion dollars worth of trading losses from November 1997 through August 1999, prosecutors said.

He then allegedly had an officer at Republic Securities issue false confirmation letters, some of which were given to Japanese investors, overstating the net asset values of the funds created by their investment.

Federal authorities said the amount of the money from investors that has not been paid back stood between $700 million and $1 billion while the remaining cash and trading positions at Republic Securities was only about $46 million.

In a release, U.S. Attorney Mary Jo White noted that Armstrong used offshore entities to sell $3 billion in securities to Japanese investors.

``This case should send a clear and concise message that those who commit securities fraud in the United States, even if they use offshore entities and victimize foreign investors, cannot escape responsibility for their actions,'' she said.

Besides the criminal and SEC civil charges, the U.S. Commodities and Futures Trading Commission filed civil charges against Armstrong, Princeton Economics International and various affiliates.

If convicted, Armstrong faces up to 10 years in prison and a fine up to twice the loss resulting from the crime.

The SEC also filed civil charges against Princeton Economics International and Princeton Global Management.

Republic recently suspended James E. Sweeney, its chief executive, and replaced the management of its futures trading division.

Republic New York is in the process of being acquired by HSBC Holdings PLC of London for $10.3 billion, although the deal's closing could be slowed by the continuing investigation, executives have said.

-- Andy (2000EOD@prodigy.net), September 14, 1999

Answers

Pin a medal on him and give him a promotion.

-- Sam (Gunmkr52@aol.com), September 14, 1999.

This is a real shocker. Armstrong has a fine reputation heading up a firm known for its level-headed research. I believe he's been in charge of Princeton for a few decades and I hope the charges prove to be false.

-- mike (maples@voy.net), September 14, 1999.

Well, i guess we take PEI off the recommended bookmark list....... C

-- Chuck, a night driver (rienzoo@en.com), September 14, 1999.

P*ss*n' in me pants, I am! Armstrong showed himself for the buffoon he is when he made his position about y2k known way back about 16 months ago.

-- OR (orwelliator@biosys.net), September 14, 1999.

Wondering how many of his cronies haven't been caught yet. Double digits I'll bet. Meanwhile, HA.....HA.....

-- Gia (laureltree7@hotmail.com), September 14, 1999.

Just another circus con man in just another circus.

-- PNG (png@gol.com), September 14, 1999.

Don't you think it's ironic that he has $5 million in small change to bail himself out...

Guess those swiss accounts came in handy after all :)

-- Andy (2000EOD@prodigy.net), September 14, 1999.