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Madoff Accountant Charged With Fraud, Makes Bail
By
Jen Chung
Published Mar 18, 2009
Modified Mar 18, 2009
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By
Jen Chung
Published Mar 18, 2009
Modified Mar 18, 2009
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Bernard Madoff's accountant was (finally) charged with helping the fallen financier run his Ponzi scheme. David Friehling was "charged with securities fraud, aiding and abetting investment adviser fraud and four counts of filing false audit reports with the Securities and Exchange Commission," according to the Wall Street Journal. Friehling, the first arrest aside from Madoff's in the case, made his $2.5 million bail after the hearing.
When the Madoff scandal emerged, many were skeptical at how a small accounting firm in a Rockland County strip mall could handle auditing Madoff's billion dollar investment firm. Friehling's firm was founded by his father-in-law Jerome Horowitz (who passed away last week—and had been interviewed by investigators recently) and Friehling apparently started working with Madoff in the 1990s.
Friehling was supposed to audit Madoff's earnings, but, per Bloomberg News, "didn’t review material sources of firm revenue, examine a bank account through which billions of dollars of client funds flowed, or verify assets, liabilities or purported stock purchases." Instead, the SEC says that Friehling "merely pretended to conduct minimal audit procedures of certain accounts to make it seem like he was conducting an audit," earning $186,000/year from Madoff. Acting U.S. Attorney Lev Dassin said, "Mr. Friehling’s deception helped foster the illusion that Mr. Madoff legitimately invested his clients’ money." Additionally, the Post reports that Friehling and his family had accounts with Madoff—an SEC violation—and withdrew $5.5 million since 2000 (hello clawbacks?).
Wayne State law professor Peter Henning tells BLoomberg News that the Friehling charges suggest the government will go after Madoff workers "even if they weren’t expressly aware of the fraud," explaining, "The government is saying he was an enabler that allowed Madoff to keep up the façade that he was running a legitimate operation. They’re saying the accountant could have blown the whistle if he did his job but he didn’t. A good accountant would have stopped this earlier."
Tagged
accountant
audit
Bernard Madoff
david friehling
fraud
Jen Chung
Jen Chung is a former WNYC and Gothamist editor.
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