John Arnold

In a decision that U.S. Magistrate Judge Brian Tsuchida called "very difficult," Intelius co-founder John Arnold is set to be released from federal detention on bond tomorrow after being held for allegedly contacting a witness in the investigation into the activities of Seattle strip-club owner Frank Colacurcio Sr.

"I stupidly reached out to a witness, and I know that to be a colossal mistake at this point," said Arnold, addressing the court. Noting that the last four days in detention have been tough on friends, family, colleagues, and himself, Arnold added, "This has been a phenomenal lesson for me, and I have no intention ... to compromise this situation further." [Post updated with additional details from a Tuesday morning court hearing]

Arnold faces charges that he lied to a federal grand jury about engaging in sex acts with dancers at Rick's strip club in Seattle.

In granting Arnold's release, Tsuchida said that influencing a witness and jeopardizing a case is not something to be taken lightly. "Although this is very serious, I'm going to give you a second chance," Tsuchida told Arnold in court. As part of the conditions of his release, Arnold must wear a GPS-enabled tracking bracelet. The judge limited Arnold's movements to work, home, court, church and his attorney's office.

Arnold's wife, Edwina, a former King County prosecutor, was instated as a third-party custodian to ensure that her husband does not violate the terms of his release. She declined to comment after the proceedings today.

Arnold admitted that he tried to contact a witness in the case, a woman referred to simply as "E.D."

Assistant U.S. Attorney Todd Greenberg -- who argued for continued detention -- said that Arnold reached out to "E.D." in order to "influence her testimony." Greenberg described a plan by which Arnold utilized a third person to deliver a letter to "E.D."

The letter included a Snoopy card with a hand written message from Arnold which said "I hope we can catch up soon" and suggested the two could meet in Las Vegas over Super Bowl weekend. Greenberg said the letter also included vague references to the legal issues, arguing that it amounted to "sneaky witness tampering."

Connie Smith, Deputy Chief U.S. Pretrial Services Officer, also suggested continued detention, telling the judge that the letter was an "egregious violation."

But Larry Finegold, the attorney for Arnold, said that his client deserved a second chance since this was his first encounter with the criminal justice system. Finegold said that Arnold had been "chastened by the experience" of spending the past four days in the federal detention center.

The judge agreed that Arnold deserved a second chance, but he warned the high-tech executive to take the terms of the bond seriously. Tsuchida cited the argument of the U.S. Attorney's Office that Arnold's word "means nothing," based on his alleged perjury and his acknowledged attempts to communicate with the witness.

"You don't want to go from bad, to terrible, to horrible," the judge said.

Intelius, a Bellevue-based provider of online background checks, markets an iPhone app called "Date Check" designed to help people find out if potential dates have been involved in criminal activity, including a feature called the "Sleaze Detector." Arnold presented the application at the Demo conference last year.

UPDATE: John Arnold was back in front of U.S. Magistrate Judge Brian Tsuchida on Tuesday morning, after the U.S. Attorney's Office said that more information had come to light about the Intelius co-founder's employment status.

Assistant U.S. Attorney Jeff Greenberg said that Arnold had misled the court and provided false information about his current role at Intelius. In making his case for continued detention, Greenberg cited a TechFlash story dated January 29, 2010 titled "Intelius co-founder put on leave after charges in strip-club probe."

Greenberg said the story indicated that Arnold had been placed on paid leave and was not actively working at Intelius, information that he said was corroborated by a detective who met with the Intelius general counsel following yesterday's hearing.

Greenberg alleged that Arnold "falsely reported the facts" about his employment status by implying that he was still actively working at the Bellevue company. "There is no more trust for Mr. Arnold," Greenberg said.

Vehemently countering that claim was Arnold's attorney Larry Finegold. Finegold noted that his client had no intention of misleading the court, adding that if anyone was to blame for the misunderstanding it was him.

"If anyone is at fault here, I am at fault (for) not doing the proper follow-up," said Finegold. But the attorney remarked that Arnold's employment status was a relatively minor issue given the more pressing matters in the case. The allegations from Assistant U.S. Attorney Greenberg amounted to nothing more than a "prosecutor's zeal" to keep his client incarcerated, said Finegold.

Finegold argued that Arnold remains an employee at Intelius and continues to draw a paycheck from the company. And he said that Arnold -- who still holds the title of executive vice president -- could be called into the offices at anytime.

"I urge the court to simply reject this out of hand," Finegold said. He then apologized to the judge for his lengthy remarks before adding: "I feel very strongly about this."

Tsuchida said there may have been some confusion over "word choice" related to Arnold's employment. As a result, he ruled in favor of the defense, allowing Arnold to be released today under the previous pretrial restrictions.

However, Tsuchida once again warned Arnold -- who must restrict travel to home, work, court, church and his attorney's office -- that the government will be watching him closely. Facing criminal prosecution, Tsuchida said that he's hopeful that Arnold now realizes that he is in a very "difficult, precarious situation."