Bernard Madoff Remains Free as Judge Upholds Bail

Bernard Madoff Remains Free as Judge Upholds Bail

Jan. 14 (Bloomberg) -- Bernard Madoff, the accused mastermind of the largest Ponzi scheme in history, will remain free on bail after a second federal judge refused a government request to jail him while it probes the alleged fraud.

Madoff, who appeared today at a hearing in Manhattan federal court, returned to his multimillion dollar Upper East Side apartment, where he is to remain under house arrest. The ruling by U.S. District Judge Lawrence McKenna comes a month after Madoff was charged with a lone count of securities fraud for allegedly directing the $50 billion scam.

Prosecutors told the judge Madoff should be jailed because he attempted to dispose of $1 million in valuables in violation of a court ordered asset freeze, and that he might flee. The judge rejected the government’s arguments, saying the existing bail terms were “severe.”

“The chance of Mr. Madoff fleeing at this point is as close to nil as you can get,” McKenna said in rejecting the request. “The freeze on the assets has made it close to impossible for the defendant to dispose of anything valuable.”

Madoff, 70, confessed that he used new money to pay old investors, the government alleged. The investment adviser, who faces as much as 20 years in prison if convicted, hasn’t formally responded to the charges. He appeared today at the courthouse wearing a bulletproof vest under a black overcoat.

Inventory Homes

McKenna imposed a new condition, requiring Madoff to inventory the contents of homes on Eastern Long Island in New York and in Florida. The magistrate judge had ordered Madoff to inventory his Manhattan apartment.

Prosecutors asked that Madoff’s bail be revoked after he transferred $1 million in jewelry to family members. On Jan. 12, a magistrate judge in Manhattan allowed him to remain free, prompting an appeal.

“The critical fact is that the defendant, knowing of the order, consenting to the order, violated it,” Assistant U.S. Attorney Marc Litt said at today’s hearing. “By violating it, the defendant acted 180 degrees opposite to his stated intent after his arrest, which was to see to it that the victims got back as much as possible.”

Madoff, who arrived in the courtroom wearing a charcoal grey suit and navy blue tie, sat silently at the defense table, flanked by his lawyers. He stared straight ahead, rarely looking up at the judge or anyone in the courtroom.

Prosecutors may renew their request to jail Madoff as the case unfolds. Janice Oh, a spokeswoman for Acting Manhattan U.S. Attorney Lev Dassin, declined to comment. Today’s ruling may be appealed to the U.S. Court of Appeals in Manhattan.

‘Futile Effort’

Defense attorney Ira Sorkin told McKenna today that the transfer of jewelry was “a desperate and futile effort” by Madoff to “reconnect” with his family.

“These had been sent out, in error, innocently, stupidly,” Sorkin told McKenna. He said in a court filing earlier today that the government made a “cynical decision to backtrack on its” agreement to allow Madoff to remain free.

With government consent, Madoff was freed Dec. 11 on $10 million bond after he was arrested. Last week, prosecutors asked that he be jailed for transferring valuables to relatives in violation of a court order in a related lawsuit by the Securities and Exchange Commission.

U.S. Magistrate Judge Ronald Ellis denied the request while imposing additional conditions. McKenna upheld that ruling.

“I think Judge Ellis was correct that the government has not shown any combination of conditions of the defendant being a danger to the community,” McKenna said.

‘Severe’ Restrictions

McKenna said the existing restrictions on Madoff were “severe” and that by having a new inventory of property and items in his Palm Beach, Florida, and Montauk, New York, homes, “makes it close to impossible to dispose of his property.”

McKenna, 75, has been on the bench since 1990 and is now a senior judge with a reduced caseload. In 2007 he sentenced former Aspen Technology Inc. Chief Executive Officer David McQuillin, who was accused by authorities of accounting wrongdoing, to four weeks in a halfway house for hiding a side deal from investors.

Madoff has been under house arrest, except for court appearances, and monitored by guards and electronic surveillance.

On Jan. 5, prosecutors said he had mailed Cartier and Tiffany watches, a ring, a diamond necklace and other jewelry in a bid to “dissipate” assets. They said his violation indicated he might flee the country.

‘Reach Out’

Sorkin has said the mailings started Dec. 24 as Madoff and his wife Ruth began to “reach out” to family and friends by giving away a few “sentimental personal items.” That evening, Ruth Madoff set aside items accumulated over 49 years of marriage and Madoff gathered watches he’d collected over the years.

The couple, the lawyer said, mailed items to their sons Andrew and Mark; to their daughters-in-law; to Ruth Madoff’s sister, Joan Roman; and to an unnamed married couple with whom they were close friends. It wasn’t until after Ruth Madoff met with lawyers on Dec. 30 that she realized they shouldn’t have done so, and the Madoffs began retrieving them, Sorkin said.

The case is U.S. v. Madoff, 08-mag-2735, U.S. District Court, Southern District of New York (Manhattan).

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