Madoff Execs Can’t Fund Defense With Ponzi Loot

MANHATTAN (CN) - Lawyers for five ex-Madoff employees cannot accept fees from money allegedly tied to the infamous Ponzi scheme, a federal judge ruled.

Days after Annette Bongiorno, Daniel Bonventre, Joann Crupi, Jerome O'Hara and George Perez pleaded not guilty in December, prosecutors sent a warning letters to the former executives' defense attorneys.

Maurice Sercarz, Roland Riopelle and Diane Ferrone (Bongiorno); Andrew Frisch and Susan Wolfe (Bonventre); Eric Breslin (Crupi); Gordon Mehler (representing O'Hara); Larry Krantz (Perez) were told to freeze money they received from their clients because the indictment calls for a forfeiture of $154.5 billion.

Complaining that the order discourages lawyers from representing the Madoff employees, the attorneys said that government was violating their clients' Fifth and Sixth Amendment due process rights.

The defense attorneys asked the court to hold a hearing to probe the prosecutors for misconduct, and demanded that their clients' indictments be dismissed.

U.S. District Judge Laura Swain rejected both motions in a 14-page order last Tuesday.

"Here, dismissal of the Indictment is unwarranted because Defendants have failed to demonstrate that the Government's conduct has violated their constitutional rights," the order states.

Swain wrote that the case that lawyers for the ex-Madoff employees cited as precedent, U.S. v. Stein, is "misplaced" because it involved fees that "one might reasonably and lawfully obtain."

"While a defendant has a property interest in funds consensually given to him by their rightful owner, he has no such interest in 'money, though in his possession, [that] is not rightfully his; the Government does not violate the Sixth Amendment if it seizes [ill-gotten] proceeds and refuses to permit the defendant to use them to pay for his defense,'" Swain wrote, citing U.S. v. Monsanto.

Though the defense attorneys also argued that prosecutors did not properly notify them that their legal fees may be seized, Swain said the lawyers had only to read the charges against their clients to figure it out.

"The Indictment further states that ... should they be convicted, the Government would seek forfeiture of a sum considerably greater than the value of their combined assets, and that nothing in the forfeiture allegation limited the sources of assets that the Government would pursue," the order states.

Swain wrote that no hearing was necessary to see if prosecutors intended to interfere with due-process rights because freezing the attorney's fees was proper.

"Futhermore, no evidentiary hearing concerning Defendants' allegations regarding the Government's motives in sending the December 2010 Letters is necessary because, as explained, those allegations, even if taken as true, are insufficient to establish a constitutional violation," the order states.

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