Madoff debate: Should he be free on bail?

updated 10:14 p.m. ET Jan. 7, 2009

NEW YORK - A debate has been raging in New York over the fact that Bernard Madoff remains free on bail, spending his days in his luxury Manhattan penthouse despite being accused of the largest financial fraud in history.

Investors, editorial writers, and the general public have all expressed outrage, and prosecutors argue Madoff should be thrown behind bars because he could flee or hide his assets. But the push to jail the disgraced financier may have another, hidden purpose: Payback for his decision to stop cooperating.

Madoff, despite a dramatic confession during his arrest, has quit talking about how the money was collected and where it went, hampering the investigation and killing any incentive to give him a break on bail, officials familiar with the case said Wednesday. The officials spoke on condition of anonymity because the probe was at a sensitive stage.

The request to revoke Madoff’s bail suggests authorities “must think something’s being withheld,” said John Coffee, a professor at Columbia Law School. “The attempt to put him in jail is a way to ratchet up the pressure to resume cooperating.”

The issue of whether the former Nasdaq chairman should be allowed to remain under house arrest in his $7 million penthouse made headlines this week when prosecutors made a sudden appearance in court and accused him of violating his bail conditions by mailing jewelry and watches worth more than $1 million to relatives and friends.

The heirlooms included at least 16 watches, a jade necklace, an emerald ring, four diamond brooches, two sets of cufflinks, a diamond bracelet and other assorted jewelry from brands like Cartier and Tiffany.

Prosecutors claimed that by moving assets that could end up being used to compensate his victims, Madoff was a risk to the community — an argument normally reserved for violent offenders.

“Typically when a white-collar defendant is arrested, the ability to commit fraud disappears,” said Anthony Barkow, executive director of the Center on the Administration of Criminal Law at New York University School of Law. “When you’re accused of a crime of violence or of being a terrorist, if you’re out on the street, you can hurt people because that’s just what you do.”

But he noted that this case was one of a kind. “Typically your fraud defendant defrauds people nobody knows. The wreckage this guy caused is astounding,” he said.

Though past big-name defendants in white collar cases typically have remained free before trial, the decision to free the 70-year-old Madoff on bail has stirred up controversy.

“Every second that Bernard Madoff passes in his penthouse — an aerie financed by perhaps the greatest theft of all time — is a gross affront to equal justice in America,” the New York Daily News wrote on Wednesday. The newspaper is owned by one of Madoff’s alleged victims, real estate magnate Mortimer Zuckerman.

Madoff’s lawyer, Ira Sorkin, has confirmed that his client is not cooperating beyond agreeing to a freeze on his assets. He has argued that mailing the personal items was a harmless mistake, and that his client shouldn’t be punished for it.

Sorkin said that on Christmas Eve, Madoff “gathered a number of watches that he had collected over the course of years, knowing that, due to the sudden change in his circumstances, he would never have an occasion to wear these watches again.”

MORE FROM U.S. BUSINESS

U.S. business Section Front

Stimulus spending faces red tape bottlenecks Madoff's auditor pleads not guilty Microsoft and Yahoo near ad deal: report CIT still fighting to stay out of bankruptcy Discount air carrier JetAmerica folds   Judge dismisses Mark Cuban trading lawsuit Billboards try to make light of recession gloom CIT’s bailout denial raises bankruptcy threat Strong bank results mask wider weakness Madoff accountant may be cutting plea deal U.S. business Section Front   Add U.S. business headlines to your news reader: