Prosecution in Ponzi case say that Madoff violated bail by sending valuables to relatives.
http://money.cnn.com/2009/01/07/news/newsmakers/madoff/?postversion=2009010714
NEW YORK (CNNMoney.com) -- Prosecutors urged a federal judge Wednesday to put alleged Ponzi scammer Bernard Madoff behind bars for trying to mail more than $1 million worth of valuable items to family members.
The U.S. Department of Justice accused Madoff, who is currently under house arrest in Manhattan, of sending five packages "containing valuables to relatives and others."
In a written filing filed in U.S. District Court for the Southern District of New York, prosecutors accused Madoff of sending one package with "approximately 13 watches, one diamond necklace, an emerald ring, and two sets of cufflinks" with a total value that "could exceed $1 million."
Prosecutors said that two other packages "containing a diamond bracelet, a gold watch, a diamond Cartier watch, a diamond Tiffany watch, four diamond brooches, a jade necklace, and other assorted jewelry -- also were sent to relatives."
Those packages were apprehended by law enforcement, said prosecutors. Sources close to the case told CNN that several of the packages were sent to his sons, who contacted their attorney and turned the valuables over to the government.
The prosecution said an additional two packages with "contents unknown" were sent to Madoff's brother and "an unidentified couple in Florida."
Prosecutors said the actions violate the terms of Madoff's house arrest, and show that "current bail conditions are insufficient to assure the safety of the community from the defendant" because he might try to "dissipate" assets from his three homes in the United States and his home in France.
"The need for detention in this case is clear," the prosecution wrote, calling the defendant a flight risk who "has admitted to having perpetrated one of the largest frauds in history," a Ponzi scheme with "losses in the tens of billions of dollars."
In a Ponzi scheme, money from new investors is used to pay off early investors, to create an appearance of legitimate returns.
Prosecutors said that Madoff's alleged attempts to send away valuable items could prevent victims from reclaiming losses.
Madoff lawyer Ira Lee Sorkin told CNNMoney.com that "our response will be in our papers, filed [to the court] today."
Earlier, Sorkin told CNN, "When Madoff realized he might be violation of the court order, he sought return of the items."
Madoff's $10 million bail was secured by properties owned by him and his wife, including the apartment in which he's spending his 24-hour house arrest, and a Palm Beach estate.
Madoff's alleged $50 billion investment scam sent shock waves through an already-fragile financial system, stretching from hedge funds and well-heeled investors on Wall Street, to Florida and Europe. Alleged victims include Spain's Banco Santander (STD) and Britain-based HSBC (HBC), as well as director Steven Spielberg and actor Kevin Bacon.
The House Financial Services subcommittee held a hearing Monday, laying the blame on the Securities and Exchange Commission for allowing the alleged scam to carry on undetected for decades.
Burned investors could have a tough time reclaiming their money. Efforts have uncovered $29 million so far from Madoff's firm, a paltry sum compared to the alleged take. But in congressional testimony on Monday, Stephen Harbeck, president of the Securities Investor Protection Corp., an agency that helps investors in failed brokerage firms, said an additional $830 million in assets has been identified.
If convicted, Madoff could spend up to 20 years in prison and face a $5 million fine.
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