U.S. seeks to jail Madoff

By Grant McCool and Rachelle Younglai

NEW YORK/WASHINGTON (Reuters) - U.S. prosecutors asked a judge to jail accused swindler Bernard Madoff on Monday, saying he sent jewellery and other items worth more than $1 million (681,000 pounds) to family and friends in violation of his bail.

A lawyer for investment adviser Madoff, who made his first court appearance since his December 11 arrest on a charge of securities fraud in what could be Wall Street's biggest scam, said his client had already returned some of the items and argued that the 70-year-old was not a flight risk.

The U.S. magistrate judge reserved decision and asked both sides for more information concerning the purported $50 billion scheme by Thursday.

As Madoff appeared in the Manhattan federal court, regulators appeared before a congressional panel which was not as restrained as the magistrate.

"Many of us have lost confidence in the SEC," U.S. Rep. Carolyn Maloney, a New York Democrat, told Securities and Exchange Commission Inspector General David Kotz as he testified before the House Financial Services Committee.

At the hearing on Madoff's alleged fraud, Kotz promised to have his report to Congress "in a matter of months, not years.

Meanwhile Madoff remains under house arrest in his Manhattan apartment and 24-hour surveillance as part of his $10 million bail, which has also required his assets to be frozen.

Many of Madoff's clients who say he stole their life savings are outraged that he has not been jailed, but allowed to remain in his $7 million apartment.