Madoff Restricted to Home; U.S. Warns of Harm, Flight (Update3)

Dec. 19 (Bloomberg) -- Bernard Madoff, accused of masterminding a $50 billion investment fraud, was placed under round-the-clock house arrest in his $7 million New York City apartment after prosecutors warned of his “harm or flight.”

Madoff, 70, had been subject to electronic monitoring and a 7 p.m. curfew under a Dec. 17 court order. Now he is barred from leaving his Upper East Side apartment except for court appearances, and his building will be watched by security guards and video surveillance, according to a letter from prosecutors filed today in federal court in Manhattan.

“The bail conditions are what the government has agreed to,” Madoff’s lawyer, Ira Sorkin, said in an interview, declining further comment. He wouldn’t say whether Madoff had been threatened.

Madoff, 70, was arrested Dec. 11 after telling his two sons and federal investigators that he had been using money from new investors to pay off old ones in a massive Ponzi scheme. He said clients of New York-based Bernard L. Madoff Investment Securities LLC lost $50 billion.

Assistant U.S. Attorney Marc Litt said in the letter, sent to U.S. Magistrate Judge Theodore Katz in New York, that Madoff’s wife, Ruth, will pay for the surveillance. Katz agreed to the conditions.

‘Harm or Flight’

The security service, which will be in place by tomorrow, will watch Madoff’s doors and will be able to send a signal from an observation post to the Federal Bureau of Investigation, according to the letter. One reason for the new bail conditions was “to prevent harm or flight,” the government said.

The New York Daily News reported yesterday, citing an unnamed source, that Madoff and his family were threatened with harm if he didn’t repay investors.

Other bail conditions remain as before. Madoff posted a $10 million bond, guaranteed by his wife and brother Peter, and he and his wife have agreed to surrender homes in Manhattan, Montauk, New York, and Palm Beach, Florida, if he flees. Madoff remains subject to electronic monitoring. The Manhattan apartment is worth about $7 million, according to bail papers.

Ruth Madoff, who hasn’t been accused of wrongdoing, also has surrendered her passport.

Madoff, who hasn’t formally responded to a securities fraud charge against him, is due to return to court Jan. 12, unless prosecutors indict him before then. Prosecutors and defense lawyers may also agree to postpone the court date.

In an interview yesterday, Sorkin said Madoff’s company is “cooperating fully with the government.” Madoff met with prosecutors earlier this week, according to people familiar with the case.

The case is U.S. v. Madoff, 08-mag-2735, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: David Glovin in U.S. District Court in New York at dglovin@bloomberg.net.

To contact the editor responsible for this story: David Rovella at drovella@bloomberg.net.