Jan. 14, 2009 -- The federal government today took a second shot at attempting to argue in court that alleged $50 billion fraudster Bernard Madoff ought be put behind bars while it gets its case against him into shape for court, and a second federal judge deflected the attempt to revoke the current bail conditions.
Madoff stepped out of a grey Kia crossover SUV wearing a blue bulletproof vest over a dark grey suit with his wavy, elegant grey hair swept back over his collar.
He removed the vest for court and sat at the defense table in the large, climate controlled courtroom calmly listening as his attorney flicked away the government's arguments and the judge questioned the very premise of the appeal.
He need not have bothered to doff the vest. The whole thing took less than one hour. Then it was back out into the bitter cold, into the grey SUV and back up to the posh confines of his $7 million penthouse.
The government's core argument, made by Assistant U.S. Attorney Marc Litt, was that there is "no set of conditions short of detention under which the defendant can be trusted."
Federal District Court Judge Lawrence M. McKenna did not buy it and handed Litt his latest defeat in the nascent case against Madoff, which has been engaged in bail discussions since the Dec. 11 arrest of the alleged master of one of, if not the largest, Ponzi schemes or financial crimes every contrived. Those discussions have been held against a backdrop of public outrage and demands that Madoff, who has not even been indicted, be jailed pre-trial.
"The government has not shown," McKenna said in a quite voice, that Madoff needed detention.
"The government has not shown," McKenna repeated, kindly and with his head bowed, that Madoff was a flight risk.
"The chance of Mr. Madoff fleeing at this point," he said is "close to nil."
The government "has not met" its legal burden, was McKenna's decision on the government's effort to appeal to him the decision on Monday by Federal Magistrate Ronald Ellis to not alter the conditions of Madoff's bail.
Madoff, for decades, allegedly scammed thousands of sophisticated investors as well as middle class professionals who had bet their retirement well-being on him. On the world's pricier golf courses, and in the dining rooms of some of the world's more exclusive country clubs, "Madoff" was whispered from doctor to banker to lawyer to investment manager as if the Bernard L. Madoff fund was the gold standard of investments: a place so secure that double digit returns came in annually for decades with nary a bad season; a club so exclusive that money was turned away.
He is currently confined, except for court appearances, to his Manhattan cooperative apartment. There is an armed security guard on duty at all times, video cameras recording visitors at both the front and rear entrances, and Madoff also wears an electronic security ankle bracelet that would instantly notify the U.S. Marshals or the FBI if he attempted to leave the premises without permission and an escort.
Litt argued that was not enough. He said that three packages Madoff and his wife, Ruth Madoff, mailed to their sons and daughter's in-law, his grandchildren and a couple in Florida containing watches and other heirloom jewelry worth about a million dollars was further proof that Madoff "cannot be trusted under any set of conditions short of detention."
Defense attorney Ira Lee Sorkin said the government is using "inflammatory rhetoric and hyperbole" to make a flimsy argument and called the gifts an innocent mistake. He also pointed out that all of Madoff's corporate assets were under the control of government-appointed trustees and receivers and his business had been shut down. In addition, according to court papers that Sorkin alluded to, Ruth Madoff had signed confessions of judgment and agreed to limit her spending to a monthly amount agreed upon with and monitored by the government and secured her husband's bail with three multimillion dollar properties in her name.
Sorkin said mailing of jewelry and watches was a "desperate and futile attempt to reconnect" with family and friends.
"There are no assets to dissipate. The accounts are frozen, the business is closed, his travel is restricted," he said.
Judge McKenna asked that the defense and prosecution list "on a single sheet of paper" the current bail conditions, which are outlined in various court document submitted and agreed to by all parties over the past four weeks. McKenna will review those conditions with an eye toward any modification. In past cases of multimillion dollar white collar fraud, the home confinement terms have included limits on visitors, visiting hours, use of internet, access to cell phones, personal digital assistants, text messaging devices and fax machines. Many of those restrictions are not currently spelled out in the bail terms.
But, Sorkin noted prior to McKenna's decision, that the only condition would seem to satisfy the prosecution was a lock down of Madoff in solitary confinment with no visitors. That is not now going to happen, although should an indictment be handed down the prosecution could once again make the argument for pretrial detention, possibly using the indictment as a condition that increased the risk of flight.
A Week of Hearings for Madoff
After they were rebuffed Monday by a federal magistrate in their effort to place Madoff behind bars, the prosecutors in the investor fraud case reinvigorated their effort this week to place the alleged perpetrator of a $50 billion Ponzi scheme behind bars until such time as he is prosecuted or a deal is reached in lieu of prosecution.
A 49-page "letter brief" submitted to Federal District Court Judge Lawrence McKenna Tuesday sought to overturn the decision by federal magistrate Ronald Ellis, but while offering a procedural history and arguing its points strongly, it seemed to offer little in the way of new information.
Prosecutors continued to argue that Madoff is an economic danger to the community - a premise that Ellis found questionable - they cited once again the effort by Madoff to ship heirloom jewelry through the mail as an attempt to "dissipate assets" and while they acknowledged the current bail conditions were perhaps the next most stringent to confinement they argued they were not enough to stop Madoff from further bleeding off assets that could recompense his allegedly defrauded investors.
The government again argued that Madoff had "little to lose given the lengthy time of incarceration that he likely faces."
The brief was filed in federal district court in New York. As a backdrop to it, published reports indicate that conversations are ongoing between the prosecution and the defense, which earlier had acknowledged some degree of cooperation with the government.
Prosecutors added that Mrs. Ruth Madoff, while not a party to the proceeding, cannot be trusted to enforce not to unilaterally "dissipate" the assets.
An initial agreement between the defense and prosecution gave soft bail terms for Madoff following his December 11th arrest - confinement at night to his $7 million Manhattan penthouse and security against flight by consigners to the bond and the penthouse and other properties in his or his wife's name. They were quickly amended to keep Madoff confined in the Upper East Side home 24 hours a day watched by armed security and wearing an electronic ankle bracelet designed to trigger alarms if he strayed.