US attorney says Madoff sons told court about jewelry

Bernard Madoff leaves federal court in Manhattan where prosecutors asked a judge to send him to prison. (Hiroko Masuike/Getty Images)

NEW YORK - Bernard Madoff remained free on bail while a federal judge considered a request by prosecutors that he be imprisoned for transferring $1 million of valuables in violation of an asset-freeze order.

Madoff disposed of five items including "very valuable jewelry," assistant US Attorney Marc Litt said yesterday in Manhattan federal court. The government has three of the items, Litt told US Magistrate Judge Ronald Ellis. Defense lawyer Ira Sorkin said the objects, including watches and cuff links, were heirlooms innocently sent to Madoff's relatives. Sorkin said he told his client to retrieve them and alerted the government.

Madoff, 70, was charged last month with securities fraud for directing a $50 billion Ponzi scheme. He is free on $10 million bail while under house arrest and electronic surveillance. Litt said the transfer is a "changed circumstance" required to alter the bail terms.

Ellis declined to immediately rule on the government request. As Madoff fought to stay out of jail, his alleged victims continued to detail their losses.

Bard College's president disclosed yesterday that the New York liberal arts school had lost about $3 million in investments related to Madoff. Harley International Ltd., a hedge fund run by Cayman Islands-based Euro-Dutch Management Ltd., invested all of its assets with Madoff, a person familiar with the matter said. The fund managed $2.76 billion as of Oct. 31.

Irving Picard, the trustee appointed to supervise the unwinding of Madoff's firm, has identified $830 million in liquid assets in the defunct Bernard L. Madoff Investment Securities LLC, according to the Securities Investor Protection Corp. Picard sent 8,000 claim forms to people who appeared to have invested with Madoff.

At yesterday's bail hearing, Litt argued the alleged mailing of the valuables by Madoff and his wife began in late December, violating an agreement to freeze his assets.

"The bail conditions that were originally set by this court haven't been violated one iota," Sorkin said.

Litt argued that the dispersal of the valuables constituted a risk to investors and justified imprisonment before trial. He added that the likelihood Madoff would be eventually imprisoned increased his risk of flight.

A spokeswoman for Interim Manhattan US Attorney Lev Dassin, declined to comment on how prosecutors first learned of the asset transfers.