Prosecutor wants Madoff jailed immediately

updated 9:33 a.m. ET Jan. 6, 2009

NEW YORK - Prosecutors on Monday said disgraced financier Bernard Madoff violated bail conditions by mailing about $1 million worth of jewelry and other assets to relatives and should be jailed without bail.

“The defendant’s recent actions amount to obstruction of justice,” Assistant U.S. Attorney Marc Litt told a judge at a hearing in federal court in Manhattan.

U.S. District Magistrate Ronald Ellis asked the lawyers to submit written arguments and said he would rule later.

Madoff’s lawyer, Ira Sorkin, described the items as heirlooms that included cufflinks and antique watches. He said they were not significant assets. The items were sent to Madoff’s children and to unidentified friends vacationing in Florida.

“We maintain it happened innocently,” Sorkin said. “He’s not a threat to the community and there’s no danger he’s going to flee.”

Madoff later left the courthouse, riding away in a silver sedan while surrounded by a swarm of cameras, and returning to his Upper East Side apartment.

The 70-year-old former Nasdaq stock market chairman was arrested Dec. 11 on securities fraud charges alleging he duped investors out of as much as $50 billion in a giant Ponzi scheme.

The prosecutor told the judge the case against Madoff “is strong and getting stronger.”

Madoff, who owns yachts and mansions in New York’s Hamptons and Palm Beach, Fla., has been confined to his Manhattan apartment under house arrest.

Meanwhile in Washington, the internal watchdog at the Securities and Exchange Commission said Monday an investigation of the agency's failure to uncover the alleged $50 billion fraud will extend broadly to the agency's enforcement operations.

Inspector General H. David Kotz said he is so concerned about the SEC’s failure to uncover Madoff’s alleged Ponzi scheme that the IG is expanding the inquiry called for last month by SEC Chairman Christopher Cox. Cox had pushed the blame squarely onto the SEC’s career staff for the failure to detect what Madoff was doing.

At the first congressional hearing on the scandal, Rep. Spencer Bachus, R-Ala., called for Congress to create a regulatory structure “for the 21st century.”

The House Financial Services Committee is trying to determine how, despite warnings back to at least 1999 to SEC staff members, Madoff continued to operate his alleged scheme.

“Clearly, our regulatory system ... failed miserably and we must rebuild it now,” said Rep. Paul Kanjorski, D-Pa.

Rep. Paul Hodes, D-N.H., said the Madoff scandal is like “the cherry on a bad sundae.”

Kotz said that he will examine the operations of the SEC’s enforcement and inspection divisions and will make recommendations, steps beyond what Cox had called for.

Thousands of individuals — including ordinary people and Hollywood celebrities — as well as big hedge funds, international banks and charities around the globe lost money investing with Madoff. A prominent French financier who had entrusted his fortune and his clients’ money to Madoff was found dead at his office in New York on Dec. 23, an apparent suicide.

Federal prosecutors said in court Monday that the 70-year Madoff violated bail conditions by mailing about $1 million worth of jewelry and other assets to relatives and should be jailed without bail.

“I am a human face on this tragedy,” said Allan Goldstein, a retired New York textile distributor who testified at Monday’s House hearing.

Goldstein, 76, said he lost his entire life savings with Madoff and had to cash in his life insurance policies to cover his mortgage.

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