U.S. Appeal of Madoff Bail Set for Hearing Tomorrow

U.S. Appeal of Madoff Bail Set for Hearing Tomorrow

By David Glovin

Jan. 13 (Bloomberg) -- A Manhattan federal judge will hold a hearing to decide whether Bernard Madoff, the accused mastermind of the biggest Ponzi scheme in history, will remain free on bail.

U.S. District Judge Lawrence McKenna scheduled arguments for 2:30 p.m. tomorrow, according to his secretary, who declined to be identified. It wasn’t immediately clear whether Madoff will be required to attend.

Prosecutors must file court papers today asking McKenna to reverse a ruling yesterday by a U.S. magistrate judge allowing Madoff to remain free on bail. Madoff is under house arrest, watched by guards and subject to electronic monitoring. His lawyers must file their response tomorrow before the hearing.

Madoff, 70, was charged last month with bilking investors in a $50 billion Ponzi scheme by using money from new investors to pay old ones. With government consent, he was freed Dec. 11 on $10 million bond. Last week, prosecutors asked that he be jailed for transferring jewelry to relatives. U.S. Magistrate Judge Ronald Ellis denied the request while imposing additional bail conditions.

The case now goes before McKenna, who will consider whether Madoff’s transfer of property in violation of a court order in a related civil lawsuit means he’s a threat to flee or poses a risk to the community, as the government has argued.

Court Order

On Jan. 5, prosecutors said Madoff violated a court order in a Securities and Exchange Commission case by mailing Cartier and Tiffany watches, a ring, a diamond necklace and other jewelry in an effort to “dissipate” his assets. They said his violation of the order indicated he might flee the country. The property was worth more than $1 million, they said.

“We have a hearing,” Madoff’s lawyer, Ira Sorkin, said today. Sorkin told Ellis last week that the mailings started Dec. 24 as Madoff and his wife Ruth began to “reach out” to immediate family and friends by giving them a few “sentimental personal items.” That evening, Ruth Madoff set aside items accumulated over 49 years of marriage and Madoff gathered watches he’d collected over the years.

The couple, Sorkin said, mailed the items to their sons Andrew and Mark; to their daughters-in-law; to Ruth Madoff’s sister, Joan Roman; and to an unnamed married couple with whom they were close friends. It wasn’t until after Ruth Madoff met with lawyers on Dec. 30 that she realized they shouldn’t have done so, and the Madoffs began retrieving them, the lawyer said.

Asset Transfer

Ellis said an asset transfer may warrant jailing a criminal defendant, though it wasn’t called for in this case. Even for the most serious offenses, more than half of all defendants are released on bail, including 73 percent of those charged with fraud, he said in the ruling.

“The issue at this stage of the criminal proceeding is not whether Madoff has been charged in perhaps the largest Ponzi scheme ever, nor whether Madoff’s actions should result in his widespread disapprobation by the public,” Ellis wrote in a 22- page opinion.

At issue is “whether the government has carried its burden of demonstrating that no condition or combination of conditions can be set that will reasonably assure Madoff’s appearance and protect the community from danger.”

The case is U.S. v. Madoff, 08-mag-2735, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: David Glovin in New York federal court at dglovin@bloomberg.net.

Last Updated: January 13, 2009 15:31 EST