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Judge Rejects Feds' Appeal to Jail Madoff
Finds prosecutors failed to meet Bail Act burden
New York Law Journal
January 15, 2009
It did not take long for Southern District Judge Lawrence McKenna to rule Wednesday that Bernard Madoff will remain out of jail until he is either convicted or pleads guilty in an alleged multibillion-dollar fraud still being unwound by federal investigators.
Following about a half hour of arguments, Judge McKenna found the government "had not met its burden" under the Bail Reform Act to show that Madoff is either a serious flight risk or is likely to be a danger to the community by dissipating assets that could be used to compensate investors.
McKenna was deciding an appeal brought by Southern District Assistant U.S. Attorney Marc Litt after Magistrate Judge Ronald Ellis on Monday refused to revoke bail. Madoff was arrested Dec. 11 after allegedly conceding to FBI agents who came to his door that there was "no innocent explanation" for the missing money.
The government initially consented to bail after the arrest. But the prosecution changed course after it was learned Madoff and his wife mailed more than $1 million worth of jewelry and watches from their Upper East Side penthouse to family and friends on Dec. 24. Their action violated a preliminary injunction obtained by the Securities and Exchange Commission in its civil suit against the disgraced investment guru.
The revelation set off a 10-day fight over bail revocation that saw the government press a broad definition of a section of the Bail Reform Act concerning jailing someone pretrial if he presents a threat to community safety.
Litt's argument that the definition can encompass ongoing economic harm, including the dissipation of assets that could be forfeited or paid out as restitution, found some traction with Ellis, but the facts of Madoff's case did not.
The threat to dissipate assets did not rise to the level of economic harm that would justify jailing Mr. Madoff, Ellis said, as he tacked on a few new bail conditions, including a personal property inventory, to add to the round-the-clock security, home detention and electronic monitoring already in place.
The effectiveness of those conditions impressed McKenna Wednesday.
To the extent the government was still arguing that Madoff might flee -- and Litt placed less emphasis on that argument in his appeal -- McKenna said the possibility of flight is as "close to nil as you can get at this point."
And freezing Madoff's assets, his home confinement and the round-the-clock scrutiny "make it close to impossible" for Madoff to dispose of any assets, the judge said.
Ira L. Sorkin of Dickstein Shapiro, who represents Madoff, faulted the government for only recently adding to its bail revocation argument the fact that $173 million in checks, ready to be mailed to friends, family and some clients, were found on Madoff's desk after his arrest.
But Litt said that was beside the point because a "pattern" of behavior was established by Madoff by the planned disbursal of the $173 million coupled with the jewelry mailing in defiance of a court order. These acts showed that Madoff "was going to be the one to decide how these assets" were distributed, Litt said.
Sorkin called the $173 million in checks "a red herring."
NOT FINAL WORD
The government may still have a few more chances to force Madoff behind bars pretrial: an immediate appeal to the 2nd U.S. Circuit Court of Appeals or a renewed bail argument following an indictment charging Madoff with more than just the single count of securities fraud on which he was arrested.
But the longer Madoff stays free on bail and refrains from violating his bail conditions, the tougher it will be for Litt to persuade a judge to lock him up.
With little room to maneuver in the case, Sorkin has had the better of the bail argument, in part because of the government's initial decision to agree to bail but mostly because of the presumptions in the Bail Reform Act.
On the facts of the case, Sorkin has sought to minimize the jewelry mailing as Madoff "reaching out to his children."
On the law, Sorkin tried to show how the public clamor for the jailing of Madoff should not sway judges in applying the act, which favors the right of a defendant to remain at liberty if there are no conditions that could ensure both his return to court and the safety of the public.
Sorkin told Judge McKenna that, following the ruling of Magistrate Judge Ellis on Monday, Congressman Anthony Weiner, D-N.Y., held a press conference outside Madoff's apartment building and said, "He should not be living at home. This judge just doesn't get it."
Sorkin said indeed "got it" and that the congressman might "get it" too "if he had read the Bail Reform Act."
The only additional requirement imposed by the judge Wednesday was to expand the personal property inventory ordered by Ellis to include personal property at the Madoffs' homes on Long Island, in Florida and in France.
The government declined comment on whether it would appeal McKenna's ruling to the 2nd Circuit.
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