Madoff Gets At Least a Couple More Days of Luxury Living

Bernard Madoff will spend another weekend in his $7 million New York penthouse. Federal Magistrate Ronald Ellis has informed the court that he will not make a decision on whether or not to revoke the bail of the alleged master of a $50 billion investor fraud scheme until Monday at noon.

Ellis listened to oral arguments for and against Madoff's bail revocation earlier this week. The prosecution submitted written arguments on Tuesday, and the defense filed its counter arguments Wednesday. From the start, Ellis told both parties that he would not rule until late today or Monday.

Nonetheless, a tense week followed filled with further disclosures of Madoff's alleged victims, leaks that indicated one feeder fund manager was in hiding from mobsters who may have invested through them, and some media accounts suggesting the decision would come earlier than Friday night or Monday morning.

A court hearing is slated for Monday morning at which time the government is either slated to indict Madoff or ask for more time to develop its case against Madoff. At that time, the bail motion may be discussed.

Prosecutors Want Madoff Behind Bars

This week prosecutors arguing that alleged $50 billion scammer Bernard Madoff should be put in jail immediately said that when Madoff's desk was searched following his arrest, investigators found approximately 100 signed checks totaling more than $173 million "ready to be sent out".

"The only thing that prevented the defendant from executing his plan to dissipate those assets was his arrest by the FBI," prosecutors say. "The defendant's recent distribution of jewelry and watches demonstrates a continuing intention to benefit those close to him to the detriment of his victims."

Prosecutors asked Judge Roland Ellis earlier this week to put Madoff in custody after they say Madoff violated the conditions of his bail agreement when he and his wife sent multiple packages worth more than $1 million containing such valuables as watches, jewelry and cufflinks to relatives and friends.

An earlier court order barred Madoff from "dissipating, concealing, or disposing of any money" or "personal property".

A defense motion saying that Madoff saw the expensive gifts as "sentimental personal items" shows that he "misses the point entirely" according to prosecutors.

Madoff's lawyers concede that on Christmas Eve, Madoff and his wife sent a number of packages to friends and family.

"Mr. Madoff gathered a number of watches that he collected over the course of years, knowing that, due to the sudden change in his circumstances, he would never have an occasion to wear these watches again," according to a brief filed by Madoff's attorneys, who say packages were sent to the Madoffs' sons, a daughter in-law, Madoff's brother and sister in-law, Mrs. Madoff's sister and a married couple who are close friends.

Madoff, say his attorneys, "simply did not realize" that the SEC order he consented to "pertained to these personal items". The jewelry has all since been recovered, according to Madoff's lawyers.

At Monday's hearing Judge Ellis questioned the validity of the government's request to put Madoff in custody considering that Madoff's current bail terms -- home confinement in his posh Manhattan penthouse -- had earlier been agreed upon by the government.

A federal prosecutor argued that the "dissipation of assets" could potentially harm investors seeking to recoup any of their losses from investing with Madoff.

On Monday, Madoff's attorney, Ira Sorkin made light of the government's claim, saying the cufflinks were worth twenty five dollars and the valuable property included a pair of $200 mittens Mrs. Ruth Madoff sent a friend. Madoff's bail is secured by his assets including a posh Manhattan apartment appraised by some at $7 million, an ocean retreat in Montauk, New York, and a Florida mansion in Palm Beach.

When Madoff was originally arrested in mid December, his bail terms included an electronic bracelet but allowed him to roam his exclusive upper East Side neighborhood during the daytime and only be confined in his home overnight. Within a week, and amid public outcry, those terms were amended to eliminate the provision that allowed Madoff freedom from confinement.

The judge's decision on whether or not Madoff should be sent to jail is expected tomorrow or Monday.

Was Madoff Running a Ponzi Scheme?

Madoff made headlines last month 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 month 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 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, has 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.

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