Madoff Accountant Surrenders, Charged with Fraud
David Friehling charged w/ securities fraud, filing false statements to the SEC.
March 18, 2009— -- The longtime accountant for admitted super scammer Bernie Madoff has become the second person charged in the financial scandal. Prosecutors say David Friehling surrendered Wednesday and is charged with six counts of securities fraud, investment adviser fraud, and for filing false statements with the SEC.
Prosecutors have not charged him with knowing about the $50 billion Ponzi scheme, in fact Friehing himself had an account with Madoff valued at over $500,000, according to the complaint, but prosecutors say that the accountant deceived investors by falsely certifying that he had audited the financial statements of Madoff's investment firm.
"Mr. Friehling's deception helped foster the illusion that Mr. Madoff legitimately invested his clients money," said acting United States Attorney Lev Dassin, of the Southern District of New York where the charges were filed.
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Friehling appeared in a Manhattan courtroom Wednesday afternoon and was released on a $2.5 million dollar bond secured by four properties belonging to him and his wife, his father and his sister in law.
Click here to watch video of Friehling leaving the court house.
Friehling was brought on as the accountant for Madoff's firm back in the early 1990s and was paid between $12,000 and $14,500 a month since 2004, according to the complaint.
Investigators have been focusing on the firm since Madoff's arrest in December when it was revealed that Friehling & Horowitz, the accounting firm used to supposedly audit the billions of dollars in investments made by Madoff, was a tiny three-person firm located in a storefront office in Rockland County, NY, where Friehling is the sole practicing accountant.
The FBI Assistant Director in Charge said Wednesday that Friehling did not fulfill his fiduciary responsibility to investors, nor his legal responsibility to the SEC.
"He did little or no testing, no verification of the 'facts' he certified," said Joseph Demarest of the FBI. "His job was not merely to rubber-stamp statements he didn't verify. Simply put, Friehling failed to do his job, and lied to investors and regulators in saying he did."
49 year-old Friehling faces a 105 year prison sentence if convicted.
Friehling's attorney, Andrew Lankler, did not respond to calls for comment.
Investigators reiterated again today that their investigation is continuing, despite their arrest of Friehling. Madoff's sons and wife Ruth were all put on guard earlier this week when prosecutors made it clear they intend to seize money and assets from the entire Madoff family. Neither son, nor Ruth, has been ruled out by investigators as possible accomplices in the scheme, though Madoff continues to insist he worked alone.
Inside the Madoff Case
Madoff pled guilty to 11 felony counts Thursday including securities fraud, mail fraud, wire fraud, money laundering, and perjury. He faces a 150 year sentence. A hearing is set for Thursday as Madoff's attorney, Ira Lee Sorkin, seeks to appeal the decision to keep Madoff behind bars until his sentencing which is scheduled for June 16.
Court filings last week put the Madoffs' personal worth at $823 million. Investigators have recovered about $950 million in cash and securities from the company. Prosecutors estimate Madoff's scam could have cost his investors anywhere from $50 to $65 billion.