March 31 (Bloomberg) -- Peter Madoff, brother of convicted fraudster Bernard Madoff, agreed with U.S. prosecutors to have some of his assets frozen in December, his lawyer said today in an unsuccessful attempt to overturn a second freeze order.

A New York appeals court today denied Peter Madoff’s request to overturn the freeze, rejecting his lawyer’s argument that the restraining order imposed by a state judge last week was “unnecessary,” “overly broad” and “totally inappropriate.” Madoff already had reached a less-restrictive agreement with federal prosecutors, the lawyer, Charles Spada, told the state appeals court in Brooklyn.

“My client can’t spend a dime, he can’t take a subway ride, he can’t buy a loaf of bread, pay his attorneys,” Spada said, asking for the state order freezing all of Madoff’s assets to be set aside. If the state freeze remains in place, Madoff may not be able to pay income taxes by April 15, Spada said.

The voluntary freeze agreed to with federal prosecutors in Manhattan on Dec. 24 allowed Madoff $10,000 a month for expenses, Spada said in court and in court papers filed today. That agreement also allowed Madoff to pay his mortgage and required him to provide prosecutors with a receipt for any purchase of more than $150.

Bernard Madoff, 70, pleaded guilty March 12 to 11 felony counts in what the government called the largest Ponzi scheme in history. He is in jail in Manhattan awaiting sentencing and faces a prison sentence of as much as 150 years. Peter Madoff, 63, who was chief compliance officer for Bernard L. Madoff Investment Securities LLC, hasn’t been charged with a crime.

Student’s Lawsuit

Peter Madoff today asked the appeals court to overturn the March 25 order freezing all of his assets. That order, issued by New York State Supreme Court Justice Stephen Bucaria on Long Island, stemmed from a lawsuit filed Andrew Samuels, 22, a law student and investor. Samuels said he lost $470,000 of his inheritance after Peter Madoff, a trustee of his trust fund, invested it with Bernard Madoff.

Thomas A. Dickerson, the appeals court justice who reviewed Madoff’s request, rejected the appeal.

“The stay continues,” Dickerson said in the ruling. “The application is denied.”

Steven Schlesinger, Samuels’s lawyer, said in an interview after court that he will return to Judge Bucaria on April 3 to seek a permanent lien against Madoff’s assets.

‘Tuition Money’

“I have a good shot Friday of working something out and getting the kid his tuition money,” he said after court. “Am I going to punish Madoff for eating a loaf of bread? No. I really just want the $500,000 he lost for my client.”

Spada said he would attempt to work out an agreement with Schlesinger over Madoff’s expenses. He had argued to the appeals court that Peter Madoff’s accounts were already closely reviewed by the U.S. Attorney’s Office, the U.S. Securities and Exchange Commission and bankruptcy trustee Irving Picard, who was appointed by the Securities Investor Protection Corp. to unwind Bernard Madoff’s businesses.

“We will continue to abide by the court’s order,” Spada said after court. “Our agreement with the U.S. Attorney’s office allows for living expenses and is still in effect,” he said. “We think this order issued by the state court is overly broad and we will seek to get it modified.”

“Mr. Madoff has not been charged with any wrongdoing,” Spada said. “His wife, daughter and sister-in-law lost millions. Any suggestion that Mr. Madoff knew about his brother’s scheme is wrong.”

Rebekah Carmichael, a spokeswoman for Interim Manhattan U.S. Attorney Lev Dassin, declined to comment.

The Nassau County case is Ross v. Madoff, 09-05534, New York State Supreme Court for Nassau County (Mineola).

To contact the reporter on this story: Patricia Hurtado in Brooklyn, New York, at phurtado@bloomberg.net.

Last Updated: March 31, 2009 15:22 EDT