Massachusetts Targets Madoff Middleman
Accused swindler Bernard Madoff was allowed to stay in his Manhattan penthouse and out of jail on Wednesday, as regulators chased down one of his top associates and investors worldwide sued over their losses.
A U.S. judge upheld a magistrate's ruling on a government request to jail the disgraced investment adviser, among the most vilified people in the United States after being charged with one of the biggest frauds in Wall Street history.
The silver-haired Madoff, 70, was seen by reporters in the lobby of the Manhattan federal courthouse removing a sleeveless dark blue flak jacket from under his coat before being escorted to the hearing. He was put under house arrest and electronic monitoring in mid-December to prevent flight or harm according to a court order.
In Massachusetts, the state's top securities regulator sued to force a Madoff middleman to testify. The middleman, Robert Jaffe, missed a scheduled meeting with regulators on Tuesday, providing a doctor's note saying that he was ill. Jaffe was said to have funneled billions of dollars to Madoff.
The global fallout continued from the purported scandal that may have bilked as much as $50 billion from the wealthy, charities, universities and banks around the world.
A Spanish law firm said it would sue in the United States on behalf of investors in Latin America, particularly Mexicans, Brazilians, Venezuelans and Argentines.
Separately, the law firm also said it was representing a group of Spanish investors with exposure of 10.5 million euros to Madoff-related funds and was preparing to seek redress under Spanish law.
All of them had a relationship of trust with financial intermediaries who told them where to place their funds, one of the firm's partners, Juan Ignacio Peinado, said in the statement.
SWISS BANK
A Swiss bank jolted by the scandal said it conducted repeated analyses of the hundreds of millions of dollars it invested with Madoff, contrary to a Wall Street Journal report.
The Union Bancaire Privee said in a statement it made repeated due diligence visits over the years, but like other investors, had no inkling that it and its investors were victims of a fraud.
Meanwhile, Ireland's financial regulator is looking into two investment funds with exposure to Madoff, including a pan-European fund known as UCITS, a spokeswoman said.
The minor drama of the day took place in the Manhattan court, where each appearance by Madoff has been met with a media frenzy of photographers, TV crews and reporters outside his apartment and the courthouse.
Under the conditions of his $10 million bail, Madoff is only allowed to leave his apartment for court appointments.
After listening for an hour to arguments from a prosecutor and Madoff's lawyer, Judge Lawrence McKenna quickly ruled from the bench that he was not granting the government's request to jail Madoff.
Prosecutors have not shown there is a risk of flight ... the chances of Mr. Madoff fleeing at this point are as close to nil as you can get, McKenna said.
I think the restrictions are so severe on the property ... it makes it close to impossible for the defendant to dispose of anything seriously valuable, he said.
Madoff has already been asked to provide an inventory of portable valuables in his Manhattan apartment. In his order, McKenna said that should also apply to properties in Montauk, New York; Palm Beach, Florida, and his French residences.
Madoff's lawyers have said their client is cooperating with the government investigations following his December 11 arrest for what would be the biggest Ponzi scheme in history -- a fraud in which early investors are paid off with the money from new clients.
The government has until mid-February to convince a grand jury to bring an indictment against Madoff, a former chairman of the NASDAQ stock market and a figure for more than 40 years in the financial industry.
It is not unusual for people accused of white-collar crimes to be offered bail packages, and at this stage of the case, indictments could come at any time, according to legal experts.
(Reporting by Grant McCool and Edith Honan; editing by Jeffrey Benkoe)
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