Prosecutor: Madoff gifts included diamond necklace

NEW YORK -- Alleged Ponzi scheme mastermind Bernard Madoff sent packages containing at least 16 watches and a diamond necklace to family members over the holidays, prosecutors said in court documents Wednesday as they argued that he be jailed right away.

The court document was formally filed in federal court in Manhattan Wednesday. A defense lawyer is scheduled to submit his arguments later Wednesday.

Assistant United States attorney Marc Litt, said Monday that Madoff violated a court injunction that forbade him from transferring any assets either of his company or his personal assets. "On Dec. 29 and Dec. 31 … jewelry and other valuables belonging to the defendant were transferred by the defendant and his wife to third parties," Litt said, according to transcripts of Monday's court hearing.

Madoff and his wife, Ruth, sent antique watches, pens, mittens and jewelry to their brother and two sons, and also to a family friend in New York. Litt said the value of the items is worth over $1 million.

Madoff's lawyer Ira Sorkin tried to make light of the transfers. "I don't mean to be cavalier about this, your Honor … the cuff links were $25," said Sorkin. "The mittens were a Hanukkah gift valued at $200."

Litt fired back: "The government is not here because of mittens and cuff links. We're here because of hundreds of thousands of dollars and perhaps millions of dollars worth of very expensive watches and other jewelry." Litt said that Madoff's action decreases the amount of assets left for recovery for victims of the scam.

Judge Ronald Ellis said he would rule after he had the documents. David Rosenfield, a counsel at Herrick Feinstein in New York, says that the government's case is rather thin. By law, the judge can revoke a bail only if there is a risk of flight or there is a danger to the community. "It's a stretch to make the argument that sending gifts poses either a risk of flight or that he can do anybody any harm," says Rosenfield.

However, Rosenfield says that Madoff could have opened up the possibility that prosecutors could file new charges for civil or criminal contempt for violating a court order.