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United States v. Madoff - 586 F. Supp. 2d 240

Rule:

Under the Bail Reform Act, the government must first establish by a preponderance of the evidence that the new circumstances presented in the application demonstrate that there is a serious risk that the defendant will flee or that there is a serious risk that he will obstruct or attempt to obstruct justice.

Facts:

The Government initiated a criminal case via a Complaint charging Bernard L. Madoff with one count of securities fraud. Upon his arrest, Madoff was interviewed by Pretrial Services, which did not recommend pretrial detention. At presentment, the Government did not seek detention, and the Parties jointly proposed a set of bail conditions. In a related civil proceeding brought by the Securities and Exchange Commission (SEC) against Madoff and Madoff Investment Securities LLC, the Parties entered into a preliminary injunction on December 18, 2008, pursuant to which Madoff was explicitly enjoined from transferring any assets belonging to him or his company.

Subsequently, Madoff and his wife mailed packages to family and to friends. The contents of these packages have been characterized by Madoff as "gifts" and items of "sentimental value." Upon learning of these transfers, the Government sought a hearing to request that Madoff be detained pending trial. According to the Government, the transfers at issue contained personal property that was clearly under Madoff's control, and the value of the items may exceed $1 million. The Government concluded that these actions, which it described as the dissipation of personal assets, violated the preliminary injunction in place in the civil case against Madoff, and constitute an obstruction of justice. Madoff's violation of the preliminary injunction has heightened significance because it occurred within one week of the issuance of the injunction and clearly indicated his lack of respect for the limits put in place by the Court. The Government concluded that the continued pretrial release of Madoff poses a clear risk of flight and obstruction of justice, as well as a danger to the safety of the community, which includes victims of Madoff's alleged fraud.

Madoff asserted that these items were holiday gifts and heirloom pieces of sentimental value, and were sent without an intent to violate any court order. He argues that the Government failed to make the threshold showing to allow for a consideration of detention, and that it failed to make any showing under the law that Madoff is a flight risk of the caliber mandating detention, or that he can disseminate assets in any fashion that could be considered a harm cognizable under § 3142 of the Bail Reform Act.

Issue:

Did the transfer of valuable items demonstrate Madoff’s being a serious risk of flight or serious risk of obstruction of justice?

Answer:

No.

Conclusion:

The federal district court denied the government's motion. The court held that the new information provided by the government (i.e., the transfer of valuable items to third parties) did not demonstrate either a serious risk of flight or serious risk of obstruction of justice. The court further held that, even if there were obstruction, and even if there remained potential for obstruction in the future, the government failed to demonstrate that no conditions could be set to reasonably protect the community from this form of obstruction. The Government has conceded that the flight risk has been "substantially diminished" with the current conditions of release and is constrained to the mere contention that the flight risk is not "zero”. The Court then found that the Government has failed to carry its burden of showing by a preponderance of the evidence that Madoff presents a serious risk of flight. The court agreed that there was legal support for considering economic harm in evaluating danger to the community under § 3142 of the Bail Reform Act. Here, however, the government failed to provide sufficient evidence that any potential future dissemination of defendant's assets would rise to the level of an economic harm cognizable under § 3142.

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