March 23, 2009

David Friehling ’81, Madoff’s Accountant, Arrested in Ponzi Scheme

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David Friehling ’81, Bernard Madoff’s chief auditor, is the first person after Madoff to be charged in connection with the $65 billion Ponzi scheme that fooled 4,800 investors. After surrendering at the federal courthouse in Manhattan on Wednesday morning, Friehling was released on a bail of $2.5 million that afternoon.
Friehling, who is 49 years old, was charged with one count of securities fraud, one count of aiding and abetting investment adviser fraud, and four counts of making false Securities and Exchange Commission filings, according to the Associated Press. If found guilty on all charges, Friehling could face up to 105 years in prison.
The three-person auditing firm, Friehling & Horowitz, was responsible for certifying the books of Madoff Investment Securities. The SEC has charged the auditing firm for failing to make the most basic auditing checks. The same firm has told the American Institute of Certified Public Accountants for 15 years that it has not been conducting audits, according to CNN.
Friehling was not accused of knowing about Madoff’s scheme, but the U.S. Attorney charged him with falsely certifying that he had audited Madoff’s operations, according to the New York Times.
Friehling took over the firm after the retirement of Jerome Horowitz, his partner and father-in-law. Horowitz died on March 12 at the age of 80, the same day Madoff pleaded guilty. Some of Madoff’s critics point to Friehling’s one-man firm auditing Madoff’s multi-billion dollar operation as a key sign of Madoff’s corruption.
Friehling has been Madoff’s auditor from 1991 through last year, ‘essentially rubber-stamp[ing] Madoff’s books for 17 years,’ prosecutors of Friehling told the Associated Press.