Madoff did not speak or show any emotion during the hearing, although he privately conferred with his lawyers on a couple occasions. He left the courthouse and returned to his $7 million Upper East Side penthouse, where he has been under house arrest and under the watch of armed guards around the clock. His outgoing mail is also being searched to ensure he doesn't try to pass along any assets that could be used to reimburse burned investors.
Defense lawyer Ira Sorkin told the judge that such extreme restrictions make it "close to impossible to dispose of anything valuable."
"I think the chances of Mr. Madoff fleeing at this point are as close to nil as you can get," he said.
The government believes he should be jailed because he sent more than $1 million in jewelry and gifts to family and friends over the holidays.
Prosecutors Marc Litt said the gifts are further proof that Madoff "cannot be trusted under any set of conditions short of detention."
But the defense said the government is using "inflammatory rhetoric and hyperbole" to make a flimsy argument, and called the gifts an innocent mistake.
Investors who lost billions to Madoff are furious that he has been allowed to remain on free on bail while being accused of such a sweeping fraud.
A magistrate judge rejected the original request that Madoff's bail be revoked, and prosecutors appealed, setting up Wednesday's hearing.----
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