Lawyers for Bernard Madoff say their client deserves to stay free on bail because his recent mailing of expensive watches and jewelry to relatives and friends was a mistake -- and not an attempt to obstruct justice or hide assets.
The 16-page filing by Madoff's defense lawyer, Ira Lee Sorkin, comes one day after prosecutors filed papers asking a judge to revoke Madoff's bail conditions.
"There are no legal or factual grounds that warrant Mr. Madoff's detention," Sorkin wrote. The lawyer said Madoff is willing to relinquish or restrict all his assets in residences in Palm Beach, Florida and Antibes, France as well as his four boats and three cars.
Earlier this week, prosecutors said Madoff and his wife sent at least 16 watches, a jade necklace and a diamond bracelet to family and relatives. Prosecutors say the mailing proves he will continue to dissipate what little is left from his $50 billion fraud.
Defense lawyers say the items mailed were just "a number of sentimental personal items" which were mailed to his sons, his brother and sister-in-law as well as friends in Florida.
"The need for detention in this case is clear," Assistant U.S. Attorney Marc Litt wrote in a letter to Magistrate Judge Ronald L. Ellis. "The continued release of the defendant presents a danger to the community of additional harm and further obstruction of justice."
Madoff was arrested Dec. 11 on a securities fraud charge after the FBI said he confessed to swindling investors. Authorities say he told his sons he ran a $50 billion Ponzi scheme and had only a few hundred million dollars left.
Although he has been freed on $10 million bail, he has been confined to his $7 million Manhattan penthouse with an electronic bracelet and 24-hour guard.
During a bail hearing Monday, Ellis asked Litt and defense lawyer Ira Sorkin to file documents explaining their positions after Litt said Madoff should lose his freedom.
Sorkin said all of the items mailed have now been recovered. He said Madoff is now willing to have all personal belongings itemized and inspected by the private security firm at his family's expense. He added all jewelry could be locked in a vault as investigators try to sort through what happened to billions in assets.
A criminal complaint against Madoff said the former Nasdaq chairman had offered to distribute between $200 million and $300 million that remained in his company's accounts to close relatives and friends before he surrendered to authorities.
The bail battle continued as Securities Investor Protection Corp. President Stephen Harbeck said through a spokeswoman that investors who lost money with Madoff could begin recovering some of their funds within two months if their accounts are easy to trace.
In his six-page letter sent to Ellis Tuesday night and publicly filed Wednesday, Litt said Madoff violated his promise not to touch his assets when he and his wife sent multiple package on Dec. 24 to relatives and friends.
The prosecutor said one package contained 13 watches, one diamond necklace, an emerald ring, and two sets of cufflinks, items estimated to be worth more than $1 million.
He said two other packages contained a diamond bracelet, a gold watch, a diamond Cartier watch, a diamond Tiffany watch, four diamond brooches, a jade necklace and other assorted jewelry and were sent to relatives.
Litt said the contents of those packages have been recovered, but prosecutors have not yet learned the contents of two additional packages sent to Madoff's brother and an unidentified couple in Florida.
The prosecutor wrote that there was also a serious risk that Madoff would flee because he has "admitted to having perpetrated one of the largest frauds in history -- a giant Ponzi scheme that likely involves losses in the tens of billions of dollars."
At Monday's bail hearing, Sorkin argued that Madoff's wife sent the expensive jewelry when she was not under a court order barring her from doing so, and Madoff did not do anything that showed him to be a threat to the community.
"If he was found to be selling narcotics, if it's found that he threatened somebody, if it's found that he was fleeing the community, then I think your honor should consider new bail conditions," Sorkin told the judge Monday. "But that's not the case here."
Attorney Jerry Reisman, representing 13 Madoff investors, said he believes Madoff should be sent to jail. He said his clients are "astounded" and "infuriated" that Madoff remains out on bail and suspect he still will try to hide assets.
The judge could make a decision on whether to revoke Madoff's bail on Friday.