Madoff Still Free on Bail; Signs Seen of Plea Deal

Madoff Still Free on Bail; Signs Seen of Plea Deal

Patrick Andrade for The New York Times
Members of the press and other onlookers gathered outside Bernard L. Madoff’s home on Monday. Mr. Madoff will remain at his residence in Manhattan, guarded by a private security force.

By DIANA B. HENRIQUES
Published: January 12, 2009
A federal magistrate refused to revoke bail on Monday for Bernard L. Madoff, the financier accused of operating a $50 billion Ponzi scheme, while signs emerged that his lawyer was actively negotiating a plea agreement that could conclude the baffling fraud case without a trial.

U.S. District Court Ruling
Federal Appeal of Ruling Federal prosecutors acknowledged in a court order released Monday that Mr. Madoff’s lawyer, Ira Lee Sorkin, is “engaging in discussions concerning a possible disposition of this case.”

While Mr. Sorkin would not comment, several former prosecutors said that language clearly indicated that the discussions were about a deal in which Mr. Madoff would agree to plead guilty in exchange for some type of leniency.

“He’s trying to cut a deal,” said Marvin G. Pickholz, a former securities regulator and specialist in white-collar crime. “The only other possible ‘disposition’ that could be negotiated would be for the government to drop the whole case — and that’s not going to happen.”

The information was contained in an order, signed by the United States Magistrate Judge Ronald L. Ellis, that approved a 30-day delay in a hearing on Mr. Madoff’s case that otherwise would have been held on Monday.

The judge also denied a government request that Mr. Madoff be jailed until he can be tried, saying that the government had not proved that he was a flight risk or a security risk.

Lev L. Dassin, the acting United States attorney in Manhattan, notified the judge late Monday that he planned to appeal the ruling, which has been stayed for 48 hours to permit that appeal.

The judge’s ruling allows Mr. Madoff to remain in his Manhattan apartment, wearing an electronic monitoring device and being watched around the clock by a security team paid for by his wife.

Prosecutors had asked the court to revoke Mr. Madoff’s $10 million bail, secured by various family homes held in his wife’s name, after he violated a court-ordered asset freeze by mailing about $1 million in expensive watches and jewelry to family and friends on Christmas Eve.

In addition to the jewelry that was sent out, prosecutors said, Mr. Madoff had plans to transfer $200 million to $300 million of investors’ money to family members and friends. When authorities searched Mr. Madoff’s office desk, they found $173 million in signed checks ready to be sent.

“The decision speaks for itself, and we intend to comply with all the conditions of his bail,” Mr. Sorkin said after the ruling was released. “But we have no comment with respect to its impact on his day-to-day life.”

The judge did place additional restrictions on the bail requirements, many of which had already been imposed by Judge Louis L. Stanton of United States District Court, who is handling the civil suit.

In denying the request, Judge Ellis wrote that he was not satisfied that the government had proved “by clear and convincing evidence” that jailing Mr. Madoff before trial was the only way to ensure that he did not flee or obstruct justice.

Included in the restrictions is one that bars Mr. Madoff from transferring any assets. Mr. Madoff’s wife, Ruth, must also comply with restrictions on the transfer of assets.

In addition, the ruling said, Mr. Madoff shall compile an inventory of all “valuable portable items” in his Manhattan apartment and supply it to the government. Casale Associates or another security company approved by the government must check the inventory every two weeks, the judge said. Mr. Madoff and the government must agree on a threshold value of the items within a week.

The security firm will also be required to examine all outgoing mail to assure no property has been transferred.

Meanwhile, a federal bankruptcy judge overseeing the liquidation of Mr. Madoff’s brokerage firm granted a request from the trustee in the case, Irving Picard, for broad power to subpoena witnesses and gather documents as part of Mr. Picard’s investigation of the alleged fraud scheme.

The trustee was appointed at the request of the Securities Investor Protection Corporation, which provides limited insurance coverage for the brokerage customers affected by the firm’s collapse.

Mr. Madoff was charged last month with securities fraud but has remained free since posting bail.

So far, Mr. Madoff has not been indicted. Under federal court rules designed to assure a defendant a speedy trial, Monday would have been the deadline for a hearing at which the prosecution would have had to show “probable cause” for bringing Mr. Madoff to court.

Typically, the prosecution fulfills that requirement by issuing an indictment.

It was known on Friday that an agreement had been reached to postpone the hearing. But Judge Ellis’s order on Monday showed the reason: so that further discussions could be held with Mr. Madoff’s lawyer.

“Obviously, both sides had to agree to delay the hearing, so there must be some discussions under way that the defendant believes are in his best interest,” said Robert A. Mintz, a lawyer at McCarter & English in Newark and a former federal prosecutor in New Jersey.

Mr. Sorkin and Daniel J. Horwitz, who represent Mr. Madoff, have argued that jailing him would be unfair and wrong.

Moreover, Mr. Madoff is too widely known at this point, they said, and too disliked to get very far.

Mr. Madoff’s lawyers characterized the jewelry he sent to family and friends as “a few sentimental personal items.” Mr. and Mrs. Madoff’s decision to mail it, they said, was an honest mistake.

Prosecutors said the gifts included 13 watches, 4 diamond brooches, a jade necklace and 2 sets of cufflinks. Most of the items were recovered.

Mr. Madoff told F.B.I. agents last month that he had overseen a financial fraud and estimated that it had cost investors as much as $50 billion, according to the criminal complaint filed in federal court in Manhattan. The fraud was continuing just days before Mr. Madoff confessed it to the F.B.I., according to a lawsuit filed by a New York company that asserts Mr. Madoff took in $10 million from it on Dec. 5.

Along with the court-appointed trustee, agents from the Securities and Exchange Commission and F.B.I. are investigating whether other people aided Mr. Madoff.

Benjamin Weiser contributed reporting.