Lawyer says Madoff cooperating with probes

NEW YORK (Reuters) - Bernard Madoff is cooperating with government investigations into his alleged $50 billion fraud, one of his lawyers said on Tuesday, as prosecutors sought to revoke his bail and jail him.

The New York Times reported on Tuesday that another lawyer for Madoff, Ira Sorkin, disavowed his earlier statements that Madoff was cooperating with prosecutors and the FBI in their investigations.

"We're cooperating with the government investigations," Madoff lawyer Daniel Horwitz told Reuters. "What we have been saying consistently is that we are cooperating with the government." Horwitz declined to provide further details.

U.S. prosecutors took a stronger stance toward Madoff on Monday, arguing that he was a flight risk and that he had mailed jewelry, watches and other personal property to friends and family in violation of his bail conditions.

Horwitz and Sorkin are representing Madoff in criminal and civil investigations stemming from accusations in court documents by the government that the 70-year-old money manager had confessed to "a giant Ponzi scheme" with losses of $50 billion.

Sorkin told a judge in U.S. District Court in Manhattan on Monday that Madoff and his wife had already returned some of the items and did not violate the bail terms. Some of the items were sent to Madoff's two sons, who turned them over to the government, Sorkin said.

Madoff, a former chairman of the NASDAQ stock market, is under house arrest in his $7 million Manhattan apartment while U.S. Magistrate Ronald Ellis considers the government's request to jail him.

Madoff has been charged with one count of securities fraud, but has yet to be formally indicted by a grand jury. Bail is routinely granted in white-collar crime cases ahead of a trial unless the government can argue there is a risk of flight.

If convicted at trial or if he were to plead guilty, Madoff could spend the rest of his life in prison, given his age and the size of the alleged fraud.

The government's new stance that it wants Madoff jailed raises questions about how much Madoff is cooperating with investigators, said Steven Feldman, a partner in the white-collar defense practice at law firm Herrick Feinstein LLP in New York and a former federal prosecutor.

"It sounds like that level of cooperation has fallen apart to some degree," said Feldman, who is not involved in the case.

A spokeswoman for the U.S. Attorney in Manhattan, which is prosecuting Madoff, declined to comment.

Prosecutors had until the close of business on Tuesday to provide a written brief on their request for Madoff to be jailed. Madoff's lawyers were to issue their response on Wednesday, with further government documents due on Thursday.

One problem for the government in requesting jail for Madoff instead of house arrest is that prosecutors initially did not oppose releasing him on bail, said defense attorney Bradley Simon of law firm Simon & Partners LLP in New York.

"The prosecutors underestimated the public outcry with respect to their agreement to bail conditions," said Simon, a former federal prosecutor. "They were looking for something to try to go back in and have his bail revoked, so they used this," he said, referring to the jewelry transfers.

If the government's request was granted, Madoff would likely be ordered to surrender to a federal holding facility in Manhattan, Brooklyn or possibly suburban Westchester County, said Feldman.

He said that while many Madoff investors may want him to be jailed now, granting bail should hinge on whether the person is a flight risk or a danger to the community.

"They can't point to specific evidence that goes to risk of flight or danger to the community," he said. "The fact that he is sending trinkets, or even expensive trinkets, doesn't make it likely that he is going to be off in Tierra del Fuego next week or anywhere else."

(Reporting by Grant McCool and Martha Graybow)