As Bernard Madoff heads to prison for 150 years, the man at the heart of Sarasota's "mini-Madoff'' scandal could get at least a temporary break from incarceration.
At a hearing last week, a federal judge said he was "obviously inclined" to reduce the $5 million bail set for Arthur Nadel, the former hedge fund manager accused of swindling 371 investors out of nearly $400 million. Nadel, arrested in January, has been unable to post $1 million in cash and get four "financially responsible'' individuals to co-sign his bond.
Nadel's lawyer wants bail lowered to $1 million, saying his 76-year-old client is in frail health and should be allowed to await trial at home in Sarasota. Judge John Koeltl's decision is expected within a few weeks.
Nadel, who faces life in prison if convicted, is considered a flight risk because he owned five planes and disappeared for two weeks after defaulting on quarterly payments to investors. Among those who think he should stay behind bars is Maria Fouracre of Osprey, an investor who wrote to the judge after learning he was considering a bail reduction.
Nadel's "frail health is questionable — he did well on his own for the two weeks when he was hiding,'' the letter said. "Furthermore, to allow Mr. Nadel to remain in his home will give him the time he needs to plot the extrication of the millions that cannot be located.''
Fouracre, 75, didn't say how much she lost, but told the St. Petersburg Times on Monday that "I'd be sick to my stomach'' if Nadel were released.
A court-appointed receiver has seized most of Nadel's assets, including rental properties in Mississippi and Georgia. The receiver has also asked 84 investors to relinquish "false profits'' — money that exceeded their original investment. Three investors so far have agreed to return a total of $250,000.
Other investors are suing Holland & Knight, the law firm that helped prepare offerings for Nadel's hedge funds. The suit says the firm shares responsibility for the alleged fraud because it approved documents that failed to disclose that Nadel, a law school graduate, was disbarred in 1982 for improperly using $50,000 from an escrow fund.
Holland & Knight says it had no duty to investigate Nadel. In support of its motion to dismiss the case it submitted the prospectus for his Victory Fund.
The fund "involves a high degree of risk,'' the prospectus warned, "and should be considered only by persons who can afford to sustain a loss of their entire investment.''
Susan Taylor Martin can be contacted at [email protected]