The U.S. Government moved today to tighten the bail conditions of alleged financial fraudster Bernard Madoff, eliminating a provision that allowed the man behind an alleged $50 billion Ponzi scheme to freely walk the streets during the day and remain confined to his home only at night.
The new security measures include a requirement that Madoff's family hire a security firm to monitor the posh penthouse address at 133 East 64th Street where Madoff is confined on a $10 million bond.
The new measures come after the original bail conditions agreed to by prosecutors came under harsh public criticism. A spokesperson for the U.S. Attorney's office in Manhattan said the office had no comment when queried on whether the altered conditions were in part or whole requested because of that criticism. The spokesperson said that the U.S. Attorney had no comment beyond what is contained in the two page request to modify bail conditions.
The new conditions require "round-the-clock monitoring at the defendant's building, 24 hours a day, including video monitoring of the defendant's apartment door(s) and communications devices and services permitting it to send a direct signal from an observation post to the Federal Bureau of Investigation in the event of the appearance of harm or flight." Both Madoff and his wife, Ruth, have surrendered their passports as a part of the bail condition, and Ruth Madoff has signed confessions of judgment on the multi-million dollar properties in her name in Palm Beach, Florida and Montauk, Long Island, two of the nation's most desirous luxury retreats.
The new bail conditions were agreed to by the defendant in the short letter submitted to the court.
Madoff's last appearance in court triggered a media frenzy, one that included shoving and pushing to get close to the defendant, who was described in numerous accounts as smirking and by all appearances did seem calm and composed in his plush quilted coat and black cap.
Madoff 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 at his $7 million Park Avenue apartment.
Madoff's wife agreed to post the mansions in her name in Palm Beach, Florida and in Montauk on New York's Long Island.
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.
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.
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.