Letters from Madoff victims show outrage, despair

NEW YORK (Reuters) - Piles of letters from clients of Bernard Madoff made public on Friday show their intense anger with the confessed swindler and his family, and their frustration with authorities for not exposing his fraud sooner.

The letters were sent to U.S. District Judge Denny Chin in Manhattan before Madoff pleaded guilty last week to committing the largest investment fraud in Wall Street's history.

They were made public on Friday, many with names and addresses blacked out to shield the identities of the authors, many of whom said they were now penniless because of Madoff.

Richard Shapiro of California wrote that he had been bilked by the 70-year-old money manager, likening his experience to "what a person who has been raped must feel like."

His letter said that he became deeply depressed after hearing of Madoff's arrest last December, and that he did not leave his home for three weeks.

"I lost 30 pounds, could not swallow food and lived in fear that my wife and children would be left penniless," Shapiro wrote. He urged Judge Chin, who is presiding over the criminal case, to sentence Madoff to "hard time."

After Madoff pleaded guilty, his bail was revoked, and he had to trade his Manhattan penthouse for a jail cell.

Shapiro wrote that he and his family are selling their home, cutting all discretionary expenses, "and I am working seven days a week to just stay afloat."

Madoff pleaded guilty on March 12 to 11 criminal charges, for what prosecutors have said was a two-decade fraud involving as much as $65 billion.

He is due to be sentenced, possibly to life in prison, on June 16. On Friday, an appeals court rejected his bid to be freed from jail until then, saying he is a flight risk and it is possible he could have stashed money abroad to finance an escape.

Some letters and e-mails came from people who had not been bamboozled by Madoff, but were outraged by what he had done.

Madoff's victims had been invited by the court to send the letters before he pleaded guilty.

Writers questioned what Madoff's family may have known about the fraud, and said they wanted the government to go after assets of his wife, Ruth, his two sons and his brother.

"The wife's assets should be seized for victims restitution, and she should be made to spend the rest of her life playing bingo and eating in a soup kitchen," one writer said.

Madoff's accountant, David Friehling, was charged on Wednesday with fraud after authorities said he pretended to audit the company that cheated thousands of investors. No members of Madoff's family have been charged.

Prosecutors have filed documents in court signaling their intent to ask for $31.5 million from loans to Madoff's two sons and $2.6 million worth of his wife's jewelry.

Another writer, Lynn Sustak of Georgia, said she and her husband had invested with Madoff since 2003 and now had nothing left for their retirement.

She and others said they thought the government had failed by not uncovering Madoff's fraud sooner. The U.S. Securities and Exchange Commission, in particular, has been criticized for not following up on tips regarding Madoff's business.

"My husband served our country in the Vietnam War, and now I feel our country through the SEC has let us down," Sustak wrote.

(Reporting by Martha Graybow; Editing by Toni Reinhold)