Madoff Remains Free While Judge Considers Request for Prison

Madoff Remains Free While Judge Considers Request for Prison


Jan. 5 (Bloomberg) -- Bernard Madoff remained free on bail while a federal judge considered a request by prosecutors that he be imprisoned for transferring $1 million of valuables in violation of an asset freeze order.

Madoff disposed of five items including “very valuable jewelry,” Assistant U.S. Attorney Marc Litt said today in Manhattan federal court. The government has three of the items, Litt told U.S. Magistrate Judge Ronald Ellis. Defense lawyer Ira Sorkin said the objects, including watches and cuff links, were heirlooms innocently sent to Madoff’s brother Peter.

Madoff, 70, was charged last month with securities fraud for directing a $50 billion Ponzi scheme out of his New York investment firm. He is free on $10 million bail while under house arrest and electronic surveillance. Litt said the transfer is a “changed circumstance” required to alter the bail terms.

Ellis declined to immediately rule on the government request. As Madoff fought to stay out of jail, his alleged victims continued to detail their losses with him and regulators sought to identify assets they could use to repay customers.

Bard College’s president disclosed today that the Annandale- on-Hudson, New York-based liberal-arts school had lost about $3 million in investments related to Madoff. Harley International Ltd., a hedge fund run by Cayman Islands-based Euro-Dutch Management Ltd., invested all of its assets with Madoff, a person familiar with the matter said today. The fund managed $2.76 billion as of Oct. 31.

Last Week

Last week, Rosenman Family LLC, managed by Martin Rosenman, president of Bronx-based Stuyvesant Fuel Service Corp., sued Irving Picard, the trustee appointed to supervise the unwinding of Madoff’s firm, seeking return of a $10 million investment.

Picard has identified $830 million in liquid assets in the defunct brokerage firm, Bernard L. Madoff Investment Securities LLC, according to the Securities Investor Protection Corp. The assets may be subject to recovery by customers of the Madoff firm, SIPC Chief Executive Officer Stephen Harbeck told a congressional committee today in prepared testimony.

Picard sent 8,000 claim forms Jan. 2 to people who appeared to have invested with Madoff, and published a notice telling customers how to recover lost money. The forms were sent to people “who appear to have been customers” of Madoff’s firm “with open accounts within the past 12 months,” according to a statement. Madoff’s advisory business was estimated to have had more than 4,000 customers, people familiar with the matter said last month.

Bail Hearing

At today’s bail hearing, Litt argued the alleged mailing of the valuables by Madoff and his wife began in late December, violating an agreement to freeze his assets as part of a Securities and Exchange Commission lawsuit.

“The bail conditions that were originally set by this court haven’t been violated one iota,” Sorkin said. The lawyer added that he learned of the government revocation bid today.

Litt argued that the dispersal of the valuables constituted a risk to investors and the public justified imprisonment before trial. He added that the likelihood that Madoff would be eventually imprisoned increased his risk of flight.

“The case against the defendant is strong, and it’s getting stronger,” the prosecutor said, making it more likely Madoff will flee. The transfer is an “obstruction of justice.”

“In the face of a direct and clear order of a court, he violated the order,” Litt said. “We’re here because of risk to the community presented by the dissipated of assets.”

‘Some Heirlooms’

On Dec. 24, Madoff began sending “some heirlooms” to his brother Peter, his two sons and an unnamed New York City couple.

Items included cuff links, watches and a pair of mittens, Sorkin said. The cuff links are worth $25 and the watches are worth more, the lawyer added. Defense Lawyers told the Madoffs on Dec. 30 to get the items back.

“There was no attempt by Mr. Madoff or Mrs. Madoff to violate the terms of bail,” Sorkin said. “Nothing has changed.”

In declining to rule today, Ellis said the legal issue is whether the dissipation of assets constitutes a risk of harm to the community that would warrant a change in Madoff’s bail status.

The judge asked both sides to file briefs on the matter. Prosecutors will deliver their brief by tomorrow. The defense response is due Jan. 7.

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

BLOOMBERG