Disgraced financier Bernie Madoff planned to use $173 million of his possibly fraudulent gains to pay bonuses to select employees, family members and friends at the time he was arrested, according to court papers filed Thursday.
Investigators found about 100 signed checks in Madoff's desk "ready to be sent out," prosecutors wrote in a letter seeking revocation of Madoff's bail.
At the time of his arrest on Dec. 11, Madoff reportedly told two senior employees of his brokerage and investment advisory firm that he had $200 million to $300 million in assets that he hoped to distribute before he was taken into custody. The checks were apparently intended to be drawn from those assets.
Meanwhile, political pressure is growing for Madoff’s bail to be revoked. U.S. Rep. Anthony Weiner (D-N.Y.), said Madoff “should not be trusted to be outside of a prison cell.”
As the legal back-and-forth continued over whether Madoff breached the conditions of his $10 million bail, prosecutors and defense attorneys argued over the value and purpose of expensive jewelry and other items the alleged mastermind of a $50 billion Ponzi scheme sent to family members around Christmastime.
Federal Magistrate Judge Ronald Ellis is expected to rule on Friday whether Madoff broke his bail conditions by mailing the items, supposedly worth more than $1 million, and should be immediately thrown in jail.
Prosecutors seeking Madoff's incarceration are arguing that Madoff sent the items to hide valuable assets that could be used to repay victims of the alleged fraud.
Madoff poses a clear flight risk, and his "blatant disregard" of his bail conditions suggests he's capable of more damage, wrote Assistant U.S. Attorney Mark Litt in a letter to the judge that was released Thursday.
“The fact that the defendant would do so, with the eyes of the world, prosecutors, and other regulatory authorities upon him, speaks volumes,” Litt wrote.
Madoff's attorney said in an earlier letter to the judge that the packages were "an effort to reach out to [Madoff's] immediate family and close friends with whom contact had been cut off."
The packages contained "sentimental personal items," according to attorney Ira Sorkin, and were not an effort to hide assets.
Sorkin said Madoff poses no flight risk because he's turned in his passport and he’s being monitored 24-hours a day.
Prosecutors disagree.
“The scope of the defendant’s crime is vast, and it is likely that thousands of victim-investors have lost sums in the billions of dollars. It is likewise clear that the defendant does not have sufficient assets to make those victims whole,” Litt wrote in an earlier letter to Ellis.
“Accordingly, it is of vital importance that the victims of defendant’s offenses be protected from once again suffering losses as a result of the transfer of the defendant’s valuable assets to third parties.”
One of the packages now in the custody of prosecutors included about 13 watches, a diamond necklace, an emerald ring and two sets of cufflinks. Two other packages reportedly contained a diamond bracelet, a gold watch, a diamond Cartier watch, a diamond Tiffany watch, four diamond brooches, a jade necklace, and other items of jewelry.
The packages show Madoff’s “willingness to disobey an explicit court order” barring him from shedding any of his assets, Litt wrote. Moreover, Madoff represents a danger to society because if he’s shedding assets those assets cannot be used to pay restitution to victims.
“The need for detention is this case is clear,” Litt wrote.
Madoff, 70, faces a single count of securities fraud for allegedly running a global Ponzi scheme in which potentially thousands of investors were defrauded of billions of dollars.
He was arrested on Dec. 11 after two senior members of his trading and investment firm alerted authorities that Madoff had told them his fraud had collapsed as investors sought billions of dollars in redemptions Madoff couldn’t cover.
The employees who reportedly blew the whistle were Madoff’s two sons, both of whom received packages containing some of the valuable items now in the custody of prosecutors.
It was the two sons, Mark and Andrew, who alerted prosecutors to the existence of the packages.
Madoff was released on $10 million bail after putting up as collateral his apartment on New York City’s Upper East Side, valued at $7 million, and properties on Long Island and Palm Beach, Fla. He is currently under house arrest.
His original bond requirements had to be modified because his original conditions required four signatures of “financially responsible” cosigners. He could get only two -- his wife and his brother. The sons apparently refused to sign.
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