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Madoff auditor charged with fraud

Latest update : 2009-03-19

David Friehling, auditor of jailed finance guru Bernard Madoff (photo), has been arrested and charged with securities fraud, according to federal prosecutors. Friehling could face 105 years in prison.

AFP - The accountant who allegedly rubber-stamped Wall Street conman Bernard Madoff's financial statements surrendered to authorities Wednesday and was charged with fraud.
David Friehling, 49, faces a sentence of up to 105 years in prison if convicted for his alleged role in helping Madoff cheat thousands of investors out of billions of dollars.
He was freed on a 2.5 million dollar bail and ordered to surrender his passport.
The accountant is not accused of knowing about Madoff's Ponzi scheme -- in which money from new clients was stolen to pay dividends to existing clients -- but of certifying faked accounts.
"He is charged with deceiving investors by falsely certifying that he audited the financial statements of Mr Madoff's business," said Acting United States Attorney Lev Dassin in New York.
"Mr Friehling's deception helped foster the illusion that Mr Madoff legitimately invested his clients' money."
Friehling is only the second person to be charged in what prosecutors call a fraud of "unprecedented" scale. Madoff, 70, was jailed last week after pleading guilty to fraud, perjury, money laundering and theft.
Lawyers for Madoff will appeal Thursday to a court in New York for the former Wall Street tycoon to be freed on bail ahead of his June 16 sentencing date, when he may be condemned to as much as 150 years in prison.
Meanwhile, scrutiny is intensifying on Madoff's immediate family, who were also his close business associates at Bernard L. Madoff Investment Securities, the company at the center of the Ponzi scheme.
Prosecutors have moved to seize 31.55 million dollars from Madoff's sons Andrew and Mark, and also more than 100 million dollars in assets held by Madoff and his wife Ruth.
Prosecutors say they are looking for a total of 177 billion dollars that allegedly passed through Madoff's hands at his fraudulent investment company. Madoff's lawyers call the figure unrealistic.
According to the criminal complaint against Friehling, the accountant helped Madoff maintain his scam by issuing unverified balance sheets, statements and internal reports.
These statements were sent both to clients and to the Securities and Exchange Commission, the Wall Street watchdog agency that failed for some two decades to notice Madoff's scheme.
Friehling also allegedly had an account worth more than 500,000 dollars with Madoff -- more than the maximum allowed under the law before breaking broker-dealer independence rules.
His job as accountant to Madoff ran from "at least the early 1990s" to the time of Madoff's arrest on December 11 last year, the complaint said.
"As a purportedly independent auditor, Friehling had a fiduciary responsibility to investors, and a legal obligation to regulators, to report the truth," FBI Assistant Director Joseph Demarest said in a statement.
"The charges unsealed today make clear that Friehling did not fulfill those duties. He did little or no testing, no verification of the 'facts' he certified ... Simply put, Friehling failed to do his job, and lied to investors and regulators in saying he did."

Date created : 2009-03-18