Madoff's accountant arrested, charged with securities fraud

Bernard Madoff's longtime accountant, David Friehling, was arrested today and charged with securities fraud for his alleged role in aiding the swindler’s $65-billion Ponzi scheme.

From Bloomberg News:

Friehling was sole proprietor of the Friehling & Horowitz accounting firm. The firm served as auditor to Bernard L. Madoff Investment Securities since 1991, prosecutors said.

Friehling, 49, is not accused of knowing about the scheme. Rather, he allegedly deceived investors by falsely certifying that he had audited the financial statements of Madoff’s firm. Besides securities fraud, Friehling is charged with aiding and abetting investment advisor fraud and four counts of filing false audit reports with the SEC.

"Friehling failed to conduct audits that complied with GAAS and GAAP," Acting U.S. Attorney Lev Dassin said in a statement, referring to generally accepted accounting standards and principles. "He did little or no testing, no verification of the ‘facts’ he certified. His job was not merely to rubber-stamp statements he didn’t verify."

Defense attorney Andrew Lankler declined to comment. Friehling, who faces a maximum 105 years in prison, will appear in Manhattan federal court later today after surrendering to authorities this morning.

Prosecutors said that as far back at 1995, Friehling lacked "professional independence" from his client by having an account at Madoff Securities with a year-end net equity of more than the $500,000 maximum amount allowed under SEC rules.

-- Tom Petruno

Comments

[Ron]

I'm having a hard time with this whole Madoff thing. I mean, if I was paid with stolen cash would I get to keep it?

to me it just seems like this should be a slam-dunk. take the books and recover all the cash from whomever it was paid to.

what does the DEA do and the U.S. Marshals Service do? if they confiscate some criminals ill-gotten goods, do they only take it from the ringleader or will they recover all that is known to be derived from the illegal source?

[Paul O]

Just a minor detail, but GAAS is Generally Accepted Auditing Standards.

GAAP is Generally Accepted Accounting Principles.