CHICAGO -- Fred Armstrong will probably continue his role as a consultant to an Indianapolis bond bank next year despite previous statements by Mayor Stephen Goldsmith that Armstrong's contract may not be renewed.

Jim Snyder, Goldsmith's special counsel and executive director of the Indianapolis Local Public Improvement Bond Bank, said last week that a one-year extension of Armstrong's contract will be recommended to the bond bank board when it meets in January.

He added that he is "confident" the board will approve the extension.

Last spring, Goldsmith suggested that Armstrong might not be working for the bond bank after his current contract expires at the end of the year. The mayor pointed to revelations in 1993 that Armstrong had failed to disclose to the board his business relationship with Mark Ferber, a former Lazard Freres & Co. partner. Ferber's dealings in Massachusetts are the subject of an ongoing grand jury probe in that state.

However, Snyder said the decision to extend Armstrong's contract was based on the work Armstrong has been doing on the city's capital improvement projects.

"We think the work is vital," Snyder said.

Armstrong's responsibility at the bond bank is to monitor spending of money for capital projects. He did not return phone calls on Friday.

Armstrong, a former Indianapolis controller and creator of the bond bank, where he served as executive director until the end of 1991, was exonerated by an internal investigation launched by the city in December 1993.

The probe focused on $15,000 Armstrong received from Lazard in January 1993 for consulting work. The work was done in 1992 when Armstrong was employed as a consultant to the bond bank and Lazard was an underwriter on bond bank debt issues.

The investigation concluded that there was no apparent violation of state or local laws, but raised the possibility that Armstrong failed to disclose a potential conflict of interest to the bond bank's board. Armstrong, meanwhile, has maintained that there was no conflict of interest in his dealings with Ferber and has characterized the payment from Lazard as a reimbursement for expenses that he incurred.

While Armstrong will apparently continue his work at the bond bank in 1995, Goldsmith has made some other changes to the bond issuing agency. This year he appointed four new members to the five-member board.

Meanwhile, Indianapolis, which has responded to subpoenas for documents from the U.S. attorney in Boston and from the Securities and Exchange Commission in connection with the Massachusetts investigation, has not received any more requests and has not been asked to testify, according to Snyder.

The investigation was sparked by revelations that Ferber maintained undisclosed fee-splitting contracts with Merrill Lynch & Co., while simultaneously acting as an independent consultant to a Massachusetts bond issuing agency, which used Merrill as a swap counterparty.

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