Prosecutors want jail now for Madoff

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Bernard Madoff, arrested December 11 after allegedly confessing to running a $50 billion Ponzi scheme, may now face jail pending his trial, as prosecutors say he violated a court agreement by mailing jewelry and other valuables worth more than $1 million to relatives and friends.

Prosecutors say he violated an asset freeze by mailing the heirlooms to his brother, son, daughter-in-law, and friends, but Madoff's attorney called it an innocent mistake. One of the mailed packages contained 13 watches, a diamond necklace, an emerald ring, and two sets of cufflinks, Bloomberg reported.

The latest news is just another chapter in the shocking case that has investors reeling and Madoff confined to his Manhattan penthouse with bail set at $10 million. His assets were frozen in order that they could be used to repay investors who lost money.

As investors file lawsuits and roughly 8,000 victims receive claim forms from the court-appointed trustee, observers are wondering how Madoff's actions could go undetected for so long.

A hearing on Capitol Hill Monday raised questions about how the Securities and Exchange Commission could have missed Madoff's improprieties. H. David Kotz, the SEC's inspector general, told lawmakers that he aims to identify those officials who failed to uncover Madoff's activities, and whether the agency is able to "to respond appropriately and effectively to complaints and detect fraud," The Washington Post reported. Victims include charities, universities, hedge funds, and individual investors.

Additional questions that will be probed include whether the SEC violated its own policies for failing to do timely reviews of Madoff's firm, and whether Madoff's membership on SEC advisory panels influenced the agency's decisions regarding his company, Bernard L. Madoff Investment Securities LLC.

However, the SEC and other regulators examined the company at least eight times in 16 years. Suspicions reached back to at least 2001. Harry Markopolos, an executive then working at a competitor, met with an SEC official in Boston that year, outlining his concerns about Madoff's steady returns. The New York Times reported that Aksia, a research firm, released a letter the day after the arrest describing was the impossibility of the gains claimed by Madoff's fund.

"Our regulatory system has failed miserably and we must rebuild it." said Paul Kanjorski, chairman of the House subcommittee overseeing capital markets, according to Bloomberg.

Kanjorski said the hearing is the first in a series of congressional forums this year to close regulatory "loopholes" and consider whether market overseers need additional authority or funding.

The Senate Banking Committee is also investigating. Senate Banking Committee Chairman Christopher Dodd wants copies of all complaints the SEC received, reports on investigations and internal e-mails that mentioned Madoff or his firm by January 22.

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