Judge Sullivan to Madoff Cooperator: Show Me Your Cards

[WSJ_law_blog]

In denying bail to Bernard Madoff’s right hand man for the second time, US District Judge Richard Sullivan seemed to have one thing on his mind at a Wednesday bail hearing in Manhattan: What kind of dirt does Frank DiPascali have on other people?

DiPascali, as LB readers might recall, pleaded guilty in August and is facing an effective life sentence under the federal sentencing guidelines. (Click here, here and here for LB coverage of the Dipascali case and here for a recent post on Sullivan and cooperating witnesses.)

With DiPascali’s tearful wife, children, parents and FBI agents — including Manhattan securities-fraud chief Pat Carroll — looking on, Sullivan (pictured) told DiPascali’s lawyer Marc Mukasey that despite assurances his client wouldn’t flee, having his family pledge assets for bail, and offering to have him electronically monitored before his sentencing next year, the only thing that might lessen DiPascali’s incentive to flee was his cooperation with the government in future cases.

Mukasey, who worked under Sullivan when both were federal prosecutors in Manhattan, said his client was hoping for a “Hurculean downward departure” from the judge at sentencing, based on his cooperation.

Problem is, as of now, Mukasey and prosecutors haven’t said exactly what kind of cooperation DiPascali is providing, and that didn’t sit well with Sullivan. The judge wondered aloud whether the only individuals DiPascali might cooperate against were sitting in a “prison in Butner, North Carolina or dead at the bottom of a swimming pool.” In that case, it wouldn’t be worth much, Sullivan said.

Madoff, of course, is serving out a 150-year sentence in Butner. Jeffry Picower, the longtime Madoff investor who made more than $7 billion in profits and was under criminal investigation, died on Sunday at his pool in Palm Beach, Fla., after suffering a heart attack, according to his lawyer. (At the hearing, prosecutors made no mention of Picower nor did they suggest he was involved in wrongdoing. A representative for the Picower family said Picower wasn’t involved in any fraud.)

Given that DiPascali pleaded guilty to, among other things, lying to government investigators who looked into the Madoff operation in 2006, the reliability of DiPascali as a witness has yet to be established, Sullivan said. And because DiPascali “lied and cheated for his own personal gain,” he said DiPascali’s actions now could be “one last scam” in a decades-long fraud.

All told, Sullivan spent close to an hour parsing the statute that governs bail, and how Dipascali did or didn’t meet the requirements.

So what’s next? Prosecutors Marc Litt and Lisa Baroni are expected to file a submission under seal to the judge that gives him a peak into what DiPascali’s cooperation is worth. Only then will Sullivan make a finally decision.

“We live to fight another day,” Mukasey said after the hearing.