Gov't steps up scrutiny of Madoff's assets, bail


  • Business
  • Wednesday, 18 Mar 2009

NEW YORK (AP) - Prosecutors stepped up their scrutiny of Bernard Madoff's family and assets Tuesday, telling a judge they want to seize jewelry, business interests and more than $30 million that the disgraced money man and his wife lent to their two sons.

The move was one of two motions prosecutors filed Tuesday, four days after Madoff pleaded guilty to what could be the largest fraud in history.

The other motion argued that Madoff must remain behind bars before his sentencing because his guilty plea creates a tremendous motive to flee, especially since he faces the near-certainty of a life prison sentence.

Assistant U.S. Attorney Lisa A. Baroni said strict bail conditions that have kept Madoff under guard in his apartment with an electronic ankle bracelet and video monitoring were not foolproof.

She said Madoff "managed to perpetrate an enormous fraud, over the course of decades; his ingenuity should not be underestimated."

The prosecutor even noted that Madoff "has been shunned by the New York community and his inability to salvage his reputation."

She said his history of extensive foreign travel, including to his $1 million home in France, also heightened the risk he could flee.

The court filing sets the stage for arguments Thursday before a federal appeals court on whether Madoff should remain jailed.

His defense lawyers have asked the court to set him free ahead of his sentencing.

The bail issue was one of two fronts for prosecutors in the Madoff case Tuesday.

They are also pursuing the fruits of the fraud, attempting to seize as many assets from Madoff as they can to reimburse victims who lost billions.

The government earlier this week indicated it will seek the forfeiture of nearly everything the Madoffs own, from the $22 million estimated value of four homes to $62 million in cash and securities, nearly all of it in the name of Madoff's wife, Ruth.

The latest list extends the demands to loans the Madoffs made to their sons, Mark and Andrew, including an Oct. 6 promissory note for $4.3 million to Andrew and a Sept. 21 note for $250,000 to Andrew.

The loans came less than three months before Madoff admitted to them that his investment business was a complete fraud.

In all, the government cites $22 million in loans to Mark and $9.55 in loans to Andrew.

The document lists 2005 as a particularly busy year, when Mark received $16 million in loans and Andrew received $5 million in loans.

Madoff has insisted that his family was not involved in the fraud, but the attempt to seize the loans is a sign prosecutors are intensifying scrutiny of the sons as they investigate how the scam was carried out.

Prosecutors are also going after Madoff's business interests.

The businesses in which the Madoffs would have to relinquish any ownership interest include real estate partnerships, a New Jersey cancer clinic and PJ Clarke's on the Hudson, a tavern located in the financial district.

Gary Berger, the administrator at Hoboken Radiology, said Ruth Madoff had bought a 21.25 percent interest in the business about five years ago through an investor who was a personal friend of Madoff.

Berger said the Madoffs never visited the facility and he had never met them, though he had arranged the financing.

"I'm happy they're looking at her assets," Berger said.

"If she received her assets due to Bernie Madoff's Ponzi scheme, obviously there's something wrong with that."

He said the facility serves between 125 and 150 people per week, including cancer patients.

The filing also says Madoff has a stake in several Sterling American Property entities.

Prosecutors say Madoff told 4,800 investors in his private securities investment business in November that their investments were worth nearly $65 billion.

Investigators hunting for assets say they have found about $1 billion in assets.

The Internal Revenue Service, meanwhile, issued guidelines that will allow tax relief and refunds for some Madoff victims who were levied for investment earnings that turned out to be nonexistent.

Madoff investors should have reported earnings from their investments with him through the years and thus paid taxes on those earnings.

Given that some of those were "phantom" profits, investors have said they should be entitled to refunds of the taxes they paid.

Investors in some of these cases are entitled to a "theft-loss" deduction, not subject to the limits on normal capital losses from investments, according to the guidelines, IRS Commissioner Douglas Shulman testified at a Senate Finance Committee hearing.

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