U.S. presses to jail Madoff on diamonds, watches mail

By Grant McCool

NEW YORK (Reuters) - Accused swindler Bernard Madoff should be jailed for violating a court order by mailing $1 million worth of diamonds, watches and other jewelry to friends and family, U.S. prosecutors told a court on Wednesday.

Prosecutors said Madoff had become a flight risk and should be jailed immediately.

As the government pressed its case, the Securities Investor Protection Corp (SIPC) said some investors who may have been bilked by Madoff could start recovering money in a few months.

The agency, created by Congress in 1970 to help investors who had accounts at failed brokerages, said it had mailed 8,000 claim forms to Madoff investors, but that it was too soon to know how many investors had been defrauded.

Authorities have said that Madoff confessed last month to running a Ponzi scheme for many years in which early investors were paid with the money of new clients, piling up losses of $50 billion.

In a brief filed in U.S. District Court in Manhattan in response to the government, Madoff's lawyers said he "simply did not realize" that mailing valuable personal items to family and friends violated a December 18 court order.

"Although Mr. Madoff had consented to the order, which prohibited Mr. Madoff from transferring assets, he simply did not realize that it pertained to these personal items," lawyers Ira Sorkin and Daniel Horwitz wrote.

Prosecutors said the million dollar package mailed by Madoff contained 13 watches, a diamond necklace and other valuables. Other packages contained diamond Cartier and Tiffany watches, a diamond bracelet, gold watch, four diamond brooches and a jade necklace, according to government documents.