Judge allows Bernard Madoff to remain free

NEW YORK -- A Manhattan judge rejected a bid to jail Bernard Madoff Monday, ruling that prosecutors hadn't showed enough proof the alleged operator of a $50 billion Ponzi scheme posed a risk of fleeing, obstructing justice or endangering the community.

But Magistrate Judge Ronald Ellis. ordered that Madoff, 70, who sent more than $1 million in gifts to relatives and friends around the year-end holidays, is now formally barred from transferring any property as a new condition of his $10 million bail.

Ellis also ordered Madoff to give prosecutors an inventory of all valuable portable items in the $7 million Manhattan apartment where he's under house arrest.

A private security firm must update the inventory every two weeks, and prosecutors and defense lawyers must agree on the value of the items by next week, Ellis wrote in his 22-page decision.

Additionally, a private security firm approved by the government must search all outgoing Madoff mail to ensure that no property is transferred, the judge ruled.

"On this matter, the government has the burden of proof – by a preponderance of the evidence with respect to the question of flight, and by clear and convincing evidence with respect to question of danger – that there are no conditions which can be set to address these concerns," Ellis wrote of prosecutors request to jail Madoff pending a potential trial. "The court finds that the government has failed to meet its burden as to either ground."

Acting U.S. Attorney Lev Dassin declined to comment on the ruling.

"The decision speaks for itself, and we intend to comply with the judge's order," said Madoff defense attorney Ira Lee Sorkin..

The ruling heightened outrage among some victims of what may be the largest Ponzi scheme in history, an apparently decades-long scam that victimized investors worldwide.

"It is outrageous," said Bette Greenfield, 71, a Florida retiree who estimates her family trust lost $350,000 in the alleged Madoff scam. "Why should he have the comforts of living in a gorgeous place when so many others like me, will now have to sell our homes?"

Madoff was arrested Dec. 11 and charged with one count of federal securities fraud. The arrest came after he told his two sons that his Manhattan-based investment advisory business was "basically a giant Ponzi scheme" and "all just one big lie," according to a federal court complaint.

Since then, investors ranging from Hollywood moguls to colleges and universities, hedge funds and ordinary investors have said they collectively lost billions of dollars to an alleged Madoff scam that enticed investors with regular returns of about 10% annually with eerily few losing months.

Although neither prosecutors nor pretrial services investigators initially recommended jailing Madoff, the disgraced money manager's bail conditions were repeatedly tightened over the last month.

He's currently confined to his apartment except for court appearances. Madoff is also monitored by an electronic ankle bracelet and has video cameras focused on his apartment entrances. Additionally, an armed security guard is stationed around the clock outside his building.

Federal prosecutors argued that Madoff violated his bail conditions by sending more than $1 million worth of watches, brooches and other jewelry and gifts bearing luxury brands like Cartier and Tiffany to relatives and friends in late December.

Defense attorneys termed the move an innocent mistake. Authorities subsequently recovered the items.

Prosecutors also argued that a search of Madoff's office desk turned up approximately 100 checks totaling roughly $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 on Dec. 11," prosecutors warned in a Jan. 8 letter to Ellis. They contended that Madoff could transfer assets, reducing anything left for scam victims, so long as he was not behind bars.

But Sorkin and fellow defense lawyer Daniel Horwitz argued in a Jan. 7 letter to Ellis "that there are simply no legal or factual grounds that warrant Mr. Madoff's detention."

Columbia University Law School Professor John Coffee called the ruling in favor of the defense a "correct and courageous" decision that carefully followed the federal Bail Reform Act.

"Although it will puzzle the public and anger some, it does affirm the constitutional right to bail and refuse to accept new inroads on that right based on a vague claim of economic harm," said Coffee. "Given the public outrage, it would have been easy for the judge to defer to the prosecutors and imprison Mr. Madoff, but that would have quietly chipped away at a constitutional right."

Before the bail ruling, prosecutors and defense lawyers agreed to a 30-day extension of the legal deadline to bring a criminal indictment against Madoff. A preliminary court hearing scheduled for Monday was postponed as a result.