Bernard Madoff, accused of the largest fraud in U.S. history, will be allowed to remain in his $7 million Park Avenue apartment instead of being sent to jail, under terms of an agreement announced today by federal prosecutors.
Click here to see Madoff being pushed by a photographer upon returning to his residence.
was unable to meet the bond conditions set last week by a federal magistrate which required him to get four people to sign his personal recognizance bond.
According to the U.S. Attorney's office, only Madoff's wife and brothers were willing to sign the document. But instead of ordering him held in jail, prosecutors agreed to home detention with electronic monitoring.
In related news, the Securities and Exchange Commission chairman said today the agency has found "no evidence of wrongdoing by any SEC personnel" in connection with Madoff's alleged $50 billion Ponzi scheme and that the SEC intends to get to the bottom of where it may have gone wrong.
"I was very concerned to learn this week that credible allegations about Mr. Madoff had been made over nearly a decade and yet never referred to the commission for action," Commissioner Christopher Cox said at a press conference.
Yesterday, Cox acknowledged what amounted to a generational failure on the part of the SEC to discover any hint of Madoff's scheme, despite allegations dating back to 1999. In his statement, Cox said that he had turned the investigation into what might be an institutional lack of rigor over to the inspector general for the SEC.
"We have asked, in addition to investigating the allegations that had been made, over a period of many years, about Mr. Madoff and the way that they were handled," Cox told reporters today. "Also questions about the policies under which they were handled, whether or not all of the actions of SEC professionals were in compliance with those policies and, if so, what changes need to be made to the policies to make sure that we can get better results with such information in the future."
Having received the case less than 24 hours ago, Security and Exchange Commission Inspector General David Kotz told ABC News that his office has barely begun the process of selecting the staff, identifying the key areas to target, and determining the way in which the IG will proceed in attempting to unravel what other authorities have termed "nearly a generation of systemic and policy failure" at the SEC.
In terms of his new bond conditions, Madoff and his luxury apartment on Manhattan's upper east side will be fitted with an electronic monitoring device by the court's pre-trial services and Madoff will be under a curfew of between 7 p.m. through 9 a.m.
Madoff's wife agreed to post the mansions in her name in Palm Beach, Florida and in Montauk on New York's Long Island.
Was Madoff Running a Ponzi Scheme?
Madoff made headlines last week when an unsealed criminal complaint in federal court in New York charged that he has been running a decades long Ponzi scheme that defrauded investors of $50 billion dollars.
A former chairman of NASDAQ, Madoff was an investment advisor who catered to a handful of high net worth clients, one of whom told ABC News that Madoff was so sought after that, as recently as two months ago, he was turning down potential new business. His handful of clients routinely expected -- and received -- double digit returns, up market or down.
Bernard Madoff Investment Securities and the SEC
According to a SEC document filed in Jan. 2008, and cited in the complaint, the firm had between 11 and 25 clients for the fiscal year ending Oct. 2007 and managed about $17 billion in assets in 23 different accounts.
Bernard Madoff Investment Securities, in addition to that private client practice, is also a market maker that trades with other dealers in bonds, the S&P 500 and NASDAQ, according to Bloomberg News.
The firm was the 23rd largest market maker on NASDAQ in October, handling a daily average of about 50 million shares a day. The firm specialized in handling orders from online brokers in some of the largest U.S. companies, including General Electric Co. and Citigroup Inc., Bloomberg News reported.
But on Dec. 10, Madoff allegedly told senior employees at his firm that his entire business was a fraud. According to the federal complaint, Madoff told those employees that he was "finished" and that "it's all one big lie." Madoff estimated "the losses from the fraud to be at least approximately $50 billion," the complaint states.
At that time Madoff also told those employees that he intended to surrender to authorities, but before he did he planned to use $200-300 million he had left to make payments to "selected employees, family and friends," the complaint states.
Madoff started his business in 1960 with $5000 in savings. He resides in New York City and, according to clients, also maintains a posh waterfront home. Known to his clients as Bernie, he has a long and significant history on Wall Street and has been a chairman of the board of the NASDAQ and was a founding member of the board of the International Securities Clearing Corp. in London.
The Web site for Madoff's firm, in its company profile, says, "Clients know that Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm's hallmark."
Madoff was arrested last Thursday morning by FBI agents and charged with criminal securities fraud by federal prosecutors in Manhattan. The complaint states that he used "manipulative and deceptive practices." The complaint cites two senior employees in describing how Madoff kept his client records "under lock and key" and how he left them in the dark about how he managed the private client funds. One of those employees, in interviews with the FBI, said that Madoff was "cryptic" in his statements. This, according to clients, is in keeping with the aura that Madoff cultivated among his clients, some of whom have kept funds under management with him for generations.
Madoff Struggled to Obtain Liquidity in December, Complaint Says
But by the first week of December, when clients began clamoring for redemptions -- to the tune of $7 billion -- the complaint states that Madoff began a struggle to obtain the necessary liquidity. The stress began to show, the employees said.
In a meeting at their boss's Manhattan apartment -- held there following a confrontation in the office Wednesday because Madoff wasn't sure "he would be able to "hold it together" if the conversation took place in the office -- the employees came away believing that Madoff was "saying, in substance that he had for years been paying returns to certain investors out of the principal received from other, different investors."
The next day, Dec. 11, Madoff spoke with FBI agent Theodore Cacioppi and invited the agent and another agent to his apartment. Cacioppo stated in the complaint that he told Madoff he came by to see if "there's an innocent explanation."
"There is no innocent explanation," Madoff replied, according to the sworn complaint.
Madoff's lawyer, Dan Horwitz, a partner at Dickstein Shapiro in New York, said his client is cooperating fully with the federal investigation.
"Bernie Madoff is a long-standing leader in the financial services industry and he is cooperating fully with the government investigation into this unfortunate set of events," Horwitz said.