Madoff’s accountant charged with fraud

Madoff’s accountant charged with fraud
By Joanna Chung in New York
Copyright The Financial Times Limited 2009
Published: March 18 2009 16:45 | Last updated: March 18 2009 23:13
http://www.ft.com/cms/s/0/f16b12dc-13d9-11de-9e32-0000779fd2ac.html


Bernard Madoff’s long-time accountant was arrested on Wednesday and charged with securities fraud and other crimes as US prosecutors widened their investigation into one of the biggest investment frauds in history.

David Friehling, 49, faces up to 105 years in prison if convicted of the federal criminal charges, which accuse him of falsely certifying that he audited Mr Madoff’s firm, aiding and abetting investment adviser fraud and filing false reports to the Securities and Exchange Commission.

Lev Dassin, acting US attorney for the southern district of New York, said Mr Friehling was not charged with knowing about Mr Madoff’s Ponzi scheme, but added that his “deception helped foster the illusion that Mr Madoff legitimately invested his clients’ money”.

Prosecutors said Mr Friehling and his wife had an investment account with Mr Madoff since the early 1980s. Mr Friehling formed his firm, Friehling & Horowitz, in 1988 and audited Mr Madoff’s firm from at least 1991, a separate civil complaint filed by the SEC claimed.

“Friehling essentially sold his licence to Madoff for more than 17 years while Madoff’s Ponzi scheme went undetected,’’ alleged James Clarkson, acting director of the SEC’s New York regional office.

Mr Madoff last week pleaded guilty to 11 federal felony charges and is awaiting sentencing. Mr Friehling, sole practitioner at his auditing firm, is the only person other than Mr Madoff to be charged in the case.

Mr Friehling “enabled” Mr Madoff’s misconduct by falsely representing to investors that his firm was financially sound, the SEC’s complaint said. Mr Friehling “merely pretended” to conduct minimal audit procedures and “even then failed to document his purported findings”.

As of November 30, 2008, he and his family had accounts with Mr Madoff reported to be worth over more than $14m, and withdrawals from the largest of them totalled more than $5.5m since 2000, according to the SEC’s complaint. The SEC also accused him of trying to hide his investment by replacing his name on his account with his wife’s name, and later naming it “Friehling Investment Fund”.

Mr Friehling received $186,000 a year in fees from Mr Madoff’s firm, along with bookkeeping and tax services for Mr Madoff and his family members, the SEC claimed.

Mr Friehling was on Wednesday released on $2.5m bond. His attorney declined to comment.