Accused NY lawyer can be freed on bail: judge

NEW YORK (Reuters) - A high-profile New York lawyer indicted in a $400 million investment fraud can be freed on $10 million bond, but under 24-hour house arrest with armed guards and electronic monitoring, a U.S. judge said on Thursday.

U.S. District Judge Jed Rakoff in Manhattan said in a written brief that strict conditions for the release of the lawyer, Marc Dreier, "will be sufficient to reasonably assure the defendant's appearance in court as required."

A U.S. grand jury indicted Dreier on January 30, accusing him of securities fraud, conspiracy and wire fraud for lying to hedge funds and investment funds that he was selling promissory notes on behalf of a New York developer and a pension fund in Canada. He pleaded not guilty to the charges.

Dreier's assets are frozen, and he has been jailed since his arrest on December 7 last year -- unlike Bernard Madoff, the more widely known accused swindler out on bail since December 11. Authorities said Madoff confessed to running a $50 billion global fraud.

Earlier bail conditions set by another judge said Dreier needed to secure a $10 million bond with $10 million worth of property or cash, which Dreier's lawyer argued his client did not have the financial means to meet.

It was not immediately clear when Dreier, 58, would be released from his cell in a Manhattan jail but the judge said he would issue a formal order by Monday. U.S. prosecutors had argued that Dreier was a flight risk and should be held in jail while they investigate.

Dreier, a lawyer for 30 years and founder of a 250-member firm, was arrested on a charge in Canada, but granted bail there. He was arrested upon his December 7 return to New York.

DIRE SITUATION

In Thursday's order, the judge wrote of the dire situation faced by Dreier, whose arrest and charges of running an investment scam and impersonation stunned the legal community.

"Dreier's motive to flee is palpable, for he faces potentially large sentences if convicted, his money and assets are either frozen or spent, his family ties appear strained, and he has become a pariah to the profession in which he once practiced, as well as much of the community at large," Rakoff wrote.

"The court finds that the government has more than satisfied its burden of proving a preponderance of the evidence that Dreier, if released without conditions, would pose a genuine risk of flight."

In arguments over Dreier's proposed release on bail in recent weeks, comparisons were made with Madoff, the 70-year-old investment manager who is under house arrest in his Manhattan penthouse apartment with security guards and an electronic monitoring anklet.

Dreier's apartment is in the same East Side neighborhood. The bail proposal calls for private armed guards to stay at Dreier's apartment for three months at a total cost of $210,000, to be paid by relatives.

"We are pleased that the judge agreed with us that the most efficacious condition that is as valuable as money is the use of the guards," Dreier's attorney Gerald Shargel said.

Harvard Law School graduate Dreier would be barred from using computers and all visitors would be pre-approved by authorities. The bond will be signed by his mother and his college-age son.

(Editing by Jeffrey Benkoe and Brian Moss)