Prosecutors press case to jail Madoff

Government argues that judge should revoke accused swindler's bail, saying he tried to 'dissipate' his assets.

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Allan Chernoff, CNN Senior Correspondent

NEW YORK (CNN) -- Federal prosecutors are appealing a court's ruling that allows alleged fraud mastermind Bernard Madoff to remain under house arrest on $10 million bail.

A district judge is scheduled to hear arguments Wednesday on the appeal of the magistrate court's decision Monday. The court rejected a request by prosecutors to revoke Madoff's bail in the multi-billion-dollar investment fraud case.

If the government fails to convince the district judge to overturn the lower court's ruling, it's possible that Madoff could remain free for months -- or even longer

"It could take years, which means Bernie Madoff is sitting home and not going to jail," said former federal prosecutor Bradley Simon of the New York-based law firm Simon & Partners.

Madoff's defense attorney is engaged in plea negotiations with federal prosecutors, according to court documents.

"They're trying to figure out if there's a plea bargain that they can come to without having to try Bernie Madoff," said Marvin Pickholz, a partner at the law firm Duane Morris, which is representing some investors affected by the scandal. "If you want his help and his cooperation, basically you've got to find out where the body is buried and how much can we recover, you're going to have to make some sort of a deal."

Prosecutors have been trying to put Madoff behind bars since last week, when the U.S. Department of Justice filed documents accusing him of shipping five packages containing more than $1 million worth of diamond-studded jewelry to family and friends, in violation of bail.

Prosecutors argue in their appeal to U.S. District Judge Lawrence McKenna that "the defendant should not be trusted with a second chance to dissipate assets" after mailing diamond and gold jewels to family and friends. "By doing so the defendant showed that he would not be deterred in his efforts to pick the winners and losers of his fraudulent scheme."

The brief adds, given the fact that "he has little to lose given the lengthy term of incarceration that he likely faces, there are no conditions short of detention that will adequately assure the safety of the community," a reference to the economic harm Madoff's victims could suffer if he were to give away assets they could claim.

Madoff has been under house arrest since posting the $10 million in bail against his $7 million Manhattan apartment, where he lives with his wife, and his residence in France.

He was arrested in December and charged with one count of securities fraud for allegedly stealing up to $50 billion from investors. If convicted, the 70-year-old could face up to 20 years in prison and a $5 million fine.

Madoff's alleged Ponzi scheme disrupted an already fragile financial system, affecting hedge funds and well-heeled investors from Wall Street, Palm Beach, Florida, and Europe. Alleged victims included Banco Santander in Spain and HSBC in Britain, as well as director Steven Spielberg and actor Kevin Bacon.

In a Ponzi scheme, money from new investors is used to pay off early investors to create the appearance of legitimate returns. To top of page

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