Authorities charge Madoff's accountant with fraud
— -- Bernard Madoff's accountant was released Wednesday on $2.5 million bail after federal authorities charged him with fraud, saying he "merely pretended" to audit Madoff's firm, which cheated thousands of investors out of billions of dollars.
David Friehling, 49, who ran a solo-practitioner firm in a New York City suburb, also took millions of dollars out of an account he and family members had with Madoff, in violation of rules that bar auditors from investing large sums of money with their clients, the Securities and Exchange Commission charged in a complaint filed Wednesday.
He's the first person other than Madoff to be charged in the Ponzi scheme that's shaken Wall Street and devastated investors and foundations. Madoff is in jail awaiting sentencing after pleading guilty last week.
Friehling, who audited Madoff's firm for 17 years, deceived investors by "falsely certifying" that he audited Madoff's business and helped "foster the illusion that Mr. Madoff legitimately invested his clients' money," said acting U.S. Attorney Lev Dassin in a statement.
Friehling is not charged with knowledge of the Ponzi scheme, in which old investors were paid with funds from new investors. But in its complaint filed in federal court in Manhattan, the SEC alleges that Friehling and his firm, Friehling & Horowitz, did not "perform anything remotely resembling an audit" or try to confirm that stocks Madoff purportedly bought on behalf of clients existed — a "fundamental audit" test.
Instead, Friehling "merely pretended" to conduct minimal audits of some accounts to cover his tracks. If he had done his job, the SEC alleges, audits and other disclosures would have shown that Madoff's firm was insolvent. Instead, Friehling's actions "furthered" the fraud and shielded Madoff from real scrutiny, the SEC alleges.
Friehling could face up to 105 years in jail. He is charged with securities fraud, aiding and abetting investment adviser fraud and filing false audits with the SEC.
