A prosecutor Wednesday ramped up his effort to have Bernard Madoff jailed while he awaits trial for his multibillion-dollar Ponzi scheme.
Assistant U.S. Attorney Marc Litt argued that Madoff, who has been out on bail since his arrest Dec. 11, cannot be trusted with assets that could be used to compensate victims of his gigantic fraud and is a genuine risk to flee the country.
Those arguments came in a letter brief to Southern District Magistrate Judge Ronald Ellis, who is being asked to revoke Madoff's bail after he and his wife Ruth mailed more than $1 million in jewelry to family and friends in late December.
Litt asked Magistrate Judge Ellis to share his broad reading of the Bail Reform Act and said the case law is on the government's side.
The same claim was made by Ira Sorkin of Dickstein Shapiro, who is fighting to keep his client out of jail. Sorkin filed his own brief late Wednesday saying the Bail Reform Act was never intended to apply to someone like Madoff, who, he reminded the court, was still entitled to the presumption of innocence.
Litt said in his brief that several courts have gone beyond interpreting the act's provision for protecting the safety of individuals and the community as allowing pretrial detention only where a person charged with a violent crime might attack again. Those courts, he said, have adopted a more expansive reading of community safety and jailed white-collar defendants where they pose a threat of additional economic harm to their victims.
That harm, Litt wrote, is the dissipation of assets by Madoff that could be used to compensate victims of the crimes he admitted to his sons, his brother, his wife and the FBI.
In late December, Madoff and his wife mailed to relatives packages of jewelry, including a diamond necklace, that had an estimated value in excess of $1 million. The jewelry has since been turned over to the government.
The Bail Reform Act, 18 U.S.C. §3142(e), states that before a judge decides to jail a defendant pretrial, the judge must first find that there are no conditions that will reasonably assure the return of the defendant to court and "the safety of any other person and the community."
In making that calculation, §3142(g) requires the judge to consider the nature and circumstances of the offense, the weight of the prosecution's evidence, the history and characteristics of the defendant, and, lastly, "the nature and seriousness of the danger to any person or the community that would be posed" by the defendant's release.
Litt argued at a Monday bail hearing and in his letter brief Wednesday that Madoff's offense was enormous, the evidence was strong and that Madoff had spent years deceiving investors in the scheme. He also said the danger of dissipation of assets was ongoing and victims would suffer more.
Sorkin contended at the Monday hearing that Litt's interpretation would gut the Bail Reform Act as to white-collar defendants. He said prosecutors could win pretrial detention merely by raising the possibility a defendant at large would be free to sap assets that should be preserved for orders of restitution or forfeiture at sentencing.
"[I]f you buy into his argument, then every defendant brought before this court should be incarcerated," Sorkin told the court.
In his papers, Litt quoted from the legislative history of the Bail Reform Act, in which the Senate Judiciary Committee stated, "The Committee intends that the concern about safety be given a broader construction than merely danger of harm involving physical violence."
That language has been cited by at least three district courts, Litt wrote, including the Northern District in United States v. Persaud, 2007 WL 1074906 (N.D.N.Y. April 5, 2007), which stated "economic harm qualifies as a danger" under the act.
In addition, two circuits have recognized potential economic harm as a justification for detaining a defendant after conviction but prior to sentencing, the 9th U.S. Circuit Court of Appeals in United States v. Reynolds, 956 F.2d 192 (1992), and the 3rd Circuit in United States v. Provenzano, 605 F.2d 85 (1979).
Sorkin answered with some case law of his own, including United States v. Khashoggi, 717 F. Supp. 1048 (S.D.N.Y), which he said held that "pretrial detention of an enormously wealthy businessman charged with several RICO violations was not warranted."
Sorkin said the reliance on the 9th and 3rd Circuits was misplaced because of the difference between pretrial and post-trial detention.
"Post-conviction detention analysis is conducted under an entirely different and less lenient provision of the Bail Reform Act," he said. "In addition, the government does not cite, nor was Mr. Madoff able to locate, any controlling 2nd Circuit case law to support the proposition that nonviolent, pecuniary harm constitutes a 'danger to the community' sufficient to justify a revocation of release."
As to the legislative history, Sorkin argued that the broader interpretation of the danger to the community factor stressed by Litt was wrong.
He said the committee report "cites only two specific instances where danger or harm is not limited to physical violence" -- labor corruption in union activities and drug trafficking, both instances "where physical danger lurks close by."
"Neither of these instances have any bearing on the matter at hand," he said.
The brief filed by Litt says there were multiple packages sent by the Madoffs, including one that contained 13 watches, one diamond necklace, an emerald ring and two sets of cuff links. Two of the packages, also sent to relatives, held a diamond bracelet, diamond Cartier and Tiffany watches, diamond brooches and other jewelry.
Two other packages were sent from the other apartment to Madoff's brother and a couple in Florida that Sorkin says are in the process of being returned.
Litt said the mailings disobeyed "an explicit court order" not to dissipate assets issued by Southern District Judge Louis Stanton in the related civil case, SEC v. Bernard L. Madoff, 08 Civ. 10791.
"The need for detention in this case is clear," Litt wrote. "The continued release of the defendant presents a danger to the community of additional economic harm and further obstruction of justice."
But Sorkin said Stanton's Dec. 18 order makes it "impossible" for Madoff to dissipate, assign or transfer his assets.
Litt also argued the transfer of assets to third parties also constitute the "changed circumstances" that would justify a de novo review of bail conditions by Magistrate Judge Ellis.
And with more emphasis than he used at the Monday hearing, Litt in his papers said Madoff poses "a serious risk of flight."
"The defendant has assets that cannot be effectively restrained, and his ties to New York have been largely severed by the loss of his New York business and his loss of status in the New York community," Litt said. "Moreover, to conduct such a long-standing and large scheme, the defendant had to deceive investors and regulators, among others, on virtually a daily basis."
Sorkin countered that the conditions of Madoff's pretrial confinement in his apartment, which include "round-the-clock physical and electronic surveillance" as well as the "notoriety" of this case render his flight an impossibility.
The government is expected to file a rebuttal brief today. The matter will then be in the hands of Magistrate Judge Ellis, who can either sign the order or call the parties back for another hearing before deciding. The magistrate judge has not indicated when he will decide the matter.