Madoff Remains Out on Bail But Judge Adds Conditions

A judge allowed disgraced money manager Bernard Madoff to remain free on bail Monday, rejecting an attempt by prosecutors to send him to jail for mailing more than $1 million in jewelry to family and friends over the holidays.

CNBC.com Bernard L. Madoff

The judge added restrictions to Madoff's bail, however. He remains under house arrest.

• Read the Judge's Decision

The ruling gives Madoff, 70, more time at home in his Manhattan apartment before he pleads guilty or goes to trial as authorities probe a worldwide $50 billion investment fraud they said he confessed to a month ago.

Prosecutors last week asked the judge to revoke Madoff's bail, saying he violated a Dec. 18 court order freezing his assets by mailing more than $1 million worth of valuables to relatives and friends.

Prosecutors said the gifts were grounds to have his bail revoked because what's left of Madoff's assets will have to be returned to burned investors.

But the judge not swayed by their arguments that Madoff represents an economic danger to the community because of the size of the fraud and his actions in sending the gifts.

Judges in bail decisions normally consider two main factors: whether the defendant is a flight risk or a danger to the community.

Video: Judge declines to revoke Madoff's bail but imposes additional restrictions.

"The government fails to provide sufficient evidence that any potential future dissemination of Madoff's assets would rise to the level of an economic harm," Magistrate Judge Ronald Ellis wrote.

The anxiously awaited decision does put more restrictions on Madoff, including forcing him to come up with a list of items at his apartment and allowing a security firm to check on the items. The security company will also be allowed to search all outgoing mail from Madoff to ensure that no property has been transferred.

Defense lawyer Ira Sorkin says the "the opinion speaks for itself and we intend to comply with the judge's order."

Sorkin has said the gifts were an innocent mistake and said he is neither a danger to the community nor a threat to flee.

Madoff, a former chairman of the NASDAQ stock market, was arrested and charged on Dec. 11 for what would be Wall Street's biggest Ponzi scheme, one in which early investors are paid off with the money of new clients.

If convicted, he faces up to 20 years in prison and millions of dollars in fines. Madoff confessed to his sons a month ago that for many years he ran a "giant Ponzi scheme" with losses of $50 billion, according to court documents.

The investment adviser has not appeared in court to formally answer the charge. He appeared in court at an initial hearing after his arrest and again on Jan. 5 when the government demanded his bail be revoked.

A court hearing tentatively scheduled for Monday on the criminal charges against Madoff has been adjourned for 30 days, his lawyers said.

The government had until 30 days from Madoff's Dec. 11 arrest to bring an indictment or decide to continue the case for now as a criminal complaint.

An FBI agent said Madoff told him "that he personally traded and lost money for institutional clients and that it was all his fault," according to court papers. Fraud experts said the purported scheme was too complicated and went on too long to have been carried out by Madoff alone.

The investment adviser who has been a Wall Street figure for more than 40 years is the only person accused in the scandal surrounding his Bernard L. Madoff Investment Securities. The firm had a brokerage-trading arm and an investment advisory arm.

© 2009 CNBC