Madoff Accountant Friehling Charged With Fraud

NEW YORK — Bernard Madoff's longtime accountant was arrested on fraud charges Wednesday, accused of aiding the man who has admitted cheating thousands of investors out of billions of dollars in the past two decades.

The charges against David Friehling, 49, come as federal authorities turn their attention to those who they believe helped Madoff fool 4,800 investors into thinking that their longtime investments were growing comfortably each year. Friehling is the first person to be arrested since the Madoff scandal broke three months ago.

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Friehling ran an accounting office in a nondescript suburban building north of New York City, and quickly drew scrutiny. Experts in accounting said it would be preposterous for such a tiny firm to audit properly an operation the size of Madoff's.

He had served as Madoff's auditor from 1991 through 2008 while he worked at the sole practitioner at Friehling & Horowitz. He was paid a tidy sum by Madoff: Prosecutors said he made between $12,000 and $14,500 a month from 2004 to 2007, or $144,000 to $174,000 a year.

Friehling faces up to 105 years in prison if he is convicted. He is charged with securities fraud, aiding and abetting investment adviser fraud and four counts of filing false audit reports with the U.S. Securities and Exchange Commission.

Friehling's lawyer, Andrew Lankler, did not immediately return a phone call Wednesday.

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Acting U.S. Attorney Lev L. Dassin said in a release that Friehling is not charged with knowing about Madoff's Ponzi scheme _ early investors being paid with money raised from new investors.

However, Dassin said: "Mr. Friehling's deception helped foster the illusion that Mr. Madoff legitimately invested his clients' money."

Madoff, 70, pleaded guilty to securities fraud, perjury and other charges on Thursday and was immediately sent to prison to await a June sentencing, when he faces up to 150 years in prison.

During his plea, Madoff said he began a Ponzi scheme in the 1990s in response to the pain of a recession, thinking it would be a shortlived solution. He said he never recovered, though, and knew prison awaited him.

As recently as November, Madoff notified investors that they had about $65 billion in their accounts. Investigators say they have recovered only about $1 billion.

Prosecutors have said they believe Madoff's fraud started in the 1980s.

Comments

[Jo Manning]

This was a family business. The entire family should be put in jail.

[berrycooda]

They will probably put most of the blame on this guy and put him in prison for
100 years and slap Madoff with an ankle bracelet and let him stay in his
fancy condo....

[Goliadkin]

Anthony Trollope wrote a terrific novel about a massive Ponzi scheme in London during the Victorian era. It's called "The Way We Live Now." It was also made into a 4-part TV series by the BBC. Check it out--very timely.

[ibsteve2u]

"He was paid a tidy sum by Madoff: Prosecutors said he made between $12,000 and $14,500 a month from 2004 to 2007, or $144,000 to $174,000 a year."

lollll...well, that explains why Madoff rolled over on himself so quickly.

No doubt Madoff realized that as soon as that accountant felt the heat, the accountant would have rolled like a magic eight ball once he contrasted Madoff's $50 billion with his lousy 150 large.

[AlltheBuzzfromCali]

Harry Markopolos in his whistleblowing report to the SEC (2005) stated that Bernie told fund managers who invested with him that he would only allow an "outside" audit to be done by one company...a company owned by his brother-in-law due to fears that external auditors would figure out his trading strategy (LOL) which was a company secret and tip off the competition. Is this accountant connected with his brother-in-law? I agree he cannot be making so little for so much-- they need to look at his lifestyle and what perks he received (house? cars? trips? private school for kids? ) as well.

[veracity]

YA THINK ??

MARTHA STEWART was arrested, tried, convicted, and serving time (for LEGALLY "dumping" a lousy $55,000 worth of ImClone stock SHE HAD EVERY RIGHT TO SELL, at ANY time, on ANY 'tip,' from ANYONE, because she had NO, ZERO, ZIP _FIDUCIARY CONNECTION_ to the Company!) - but Obama's INSANELY INCOMPETENT DoJ and SEC is only NOW getting around to asking to see Bernie Madoff's books (and book-keeper) ????

DAMN!! Did Obama NEVER WATCH "The UNTOUCHABLES", about HIS town, CHICAGO, was CRIME-RIDDEN until "the Untouchable" cops (un-corruptable) WENT AFTER AL CAPONE's BOOKS ????

It is simply ASTOUNDING how BUSHIAN, COMPLICIT IN THE COVER-UP of MASSIVE FINANICAL FRAUD, Obama is making himself !!!!!!

President Obama, IF you don't know how to PROSECUTE FINANCIAL FRAUD, Get Bush's guys who PROSECUTED Martha Stewart !!

They may be PERJUROUS LIARS, but at least they can win prosecutions - which is a HELL of a lot more than can be said of YOUR administration !!

[yozampj]

To veracity: I'm assuming your comment is tongue-in-cheek, ridiculing the DoJ and SEC under Bush for their prosecution of Martha Stewart while ignoring the Madoff situation. I can't believe you could be serious in stating "Obama's insanely incompetent DoJ & SEC are only now getting around to asking to see Madoff's books and bookkeeper" given that Obama and his adminsitration have been in office exactly 8 weeks, while prosecutors believe Madoff's scheme started in the 80's. Madoff admits it started in the 90's, and Harry Markopolos has flagged the situation to the SEC at least three times over the last 5-8 years.. Unfortunately, there may be readers who miss your sarcasm and blame Obama.

[veracity]

umm... AM I DELUSIONAL ??? With THREE TRILLION DOLLARS in BAILOUTS in PAST SIX MONTHS, was there _NO_ NO, ___NO___ FRAUDULENT ACCOUNTING involved besides Madoff ???!!

IF SO - HOW MANY MONTHS does Obama WANT, to put together some FORENSIC AUDITORS ???!!

Come'on guys - I was patient for 6-8 weeks, but at this point, it MUST be said:

__OBAMA's #1 PRIORITY is HELPING the FRAUDSTERS TAKE HOME their loot !! __

(In his, Obama's apparently CLINTONIAN Stockholm-Syndrome fascination with the BIG MONEY folks, and his _delusional_ concept that "BIPARTISANSHIP" TRUMPS his FIDUCIARY RESPONSIBILITIES to American taxpayers !!

Would someone PLEASE tell Mr. Obama about the movie "UNTOUCHABLES" - how the Chicago cops & feds ONLY brought AL CAPONE down, by EXAMINING HIS BOOKS; and,
#2. That PRESIDENT LINCOLN did NOT need the "BEST & BRIGHTEST" to be "BI-PARTISAN" - he NEEDED the "BEST & BRIGHTEST" to ROOT OUT the SOUTHERN ENTITLEMENT to OWN the United States, or SET UP A RIVAL, SLAVERY-BASED aggressive, EXPANSIONSIT EMPIRE !!!!!!!

[ibsteve2u]

"Obama's INSANELY INCOMPETENT DoJ and SEC is only NOW"?!?!?

Wow, do you righties ever listen to yourselves?

You knelt there and sucked up that last administration's claim about the duration of the Iraq war: "It could last six days, six weeks. I doubt six months."

Yet you expect Obama to clean up their mess in LESS than six weeks? You guys REEK of hypocrisy.

[SFkid]

All I can say is HAHA HA...HA, HA. 105 Years seems fair ;)

[Jazzman323]

I wonder if Madoff's accountant faithfully donated to the DNC like Madoff did.

[JDOK]

Selective memory is of little value Jazzman unless, of course, you have an agenda beyond the facts...........Madoff apparently gave to both the Republicans and the Democrats, he is a registered Republican and favored the Republicans with financial gifts by a factor of three to one.

Jazzman, spend less time listening to Sean Hannity and more time obtaining facts before spreading lies.

[Jazzman323]

What I read was that Madoff was a Democrat and I only saw donations to the DNC. Please provide a source showing his other donations.

[dibick99]

between enron and madoff i'm ashamed of what was once my profession. one of these days the american institute of cpas is going to realize that, as long as someone is paying the fees, there is no such thing as an independent accountant.

[brandnewstuff]

Now Go and Charge RUTH!

[roshni]

The accountant should be a rich source of information (no pun intended). He should be able to tell authorities where the rest of Madoff's family is hiding his ill-gotten funds. Arrest Ruth Madoff and his children as they are hiding his assets!

[Cil]

HEAVENS HELP US PLEASE!

Why in the name of logic did the SECURITIES AND EXCHANGE COMMISSION
NOT QUESTION THE VALIDITY OF MADOFF'S ACCOUNTING PRACTICES?

It is absolutely ASTONISHING and MIND BOGGLING that the SEC let this multi billion
investment company slide by without questioning and scrutinizing the AUDITING
AND ACCOUNTING CERTIFICATION issued by one lone "supposedly certified"
accountant. IT IS SO OBVIOUS THAT THIS WAS A DELIBERATE PLOY TO DO THE
DIRTY DEED OF STEALING FROM INVESTORS!

As a certified accountant, I find this failing by the SEC IMPOSSIBLE TO
UNDERSTAND OR EXCUSE. THE SEC SHOULD BE HELD ACCOUNTABLE
FOR THIS INVESTMENT FRAUD, BECAUSE THEY ARE JUST AS GUILTY AS
MADOFF, FOR CRYING OUT LOUD, THEY WERE EVEN TIPPED OFF ABOUT
THIS QUESTIONABLE SITUATION!

WOW!

[Sigger]

As a CPA myself, in this time of Peer Reviews, etc. I also find this failing by the SEC to be unbelievable. Literally, unbelievable! One might also throw in the NY State Board of Accountancy for their complicit failing. I'm not offering this as an excuse, but if the SEC was/is starved for manpower and expertise, they've got one heck of a management problem to address. Over the years, we've also found out, starting with Enron, that we can no longer trust the integrity of the international accounting firms. And when we can't rely on the SEC or the big firm CPA's, we've got a problem that needs to be fixed.

[Stirner]

When was the last time you heard a government time-server had been "F...."? Among incompetent government hacks, this "F-word" is never spoken -- unless by political moralists as Barney Franks and then only when applied to the private sector. Don't hold your breath for anyone in the S.E.C. to have the "F-word" said to them.

[ohmetoo]

As in YOU"RE FIREd! lol

[MartinRead]

Just for information, is the SEC actually liable in any sense for such any obvious failure?

[txshldm0007]

The major question is: If Madoff did not buy any stoks where is the money? It can't be only $69 million that his wife has ... we are talking about 60+ Billion dollars

Other questions: Was he a one-man-company? where are the other conspirators? VPs of his operations?

[Disdain]

I'm afraid that there is a strong possibility that all the money is gone. A ponzi requires you to take from one group of people to pay off another. For years people have retrieved money from their so called account and some have taken it all. In addition, the Madoffs gave away a whole lot of money to charity on top of the money that they spent on themselves.

The reason this whole thing came to a screeching halt is because there was not enough new money to payoff those who were demanding money from their account. I am willing to bet anything that the situation would have gone on a lot longer had they had enough money to cover their tracks.

[AnotherMcIntosh]

So the Feds finally got an accountant.

If they are really taking care of business, they should look for an attorney or two. This scheme involved legal complexities and could not have gone on for so many years without the knowledge and participation of at least one lawyer.

[Sherzie]

The second domino falls . . . if the feds are doing their job, there should be more indictments . . . like all the Madoff employees who prepared and mailed falsified client statements of the trades that never took place. Isn't it one count of mail fraud for each statement mailed?

[OC4Obama4Pres]

Most likely the rank and file employees didn't know anything about the scam. The little people didn't do this.

[Eugenics]

You don't know that.