An accountant for Bernard Madoff "pretended" to conduct audits of the confessed swindler's investment firm, authorities said today in charging him with fraud going back 17 years in the biggest investment scheme on Wall Street.
The accountant, David Friehling (49), who ran a small storefront firm in a New York suburb, is the first person besides Madoff to be arrested on criminal charges in the long-running fraud. The US Securities and Exchange Commission (SEC) filed civil charges against Mr Friehling.
Madoff (70), pleaded guilty on March 12t to running a worldwide fraud that prosecutors said went back at least 20 years, drawing in as much as $65 billion from big and small investors and charities.
Madoff, a former Nasdaq stock market chairman, was jailed after pleading guilty to 11 criminal counts and could spend the rest of his life in prison when he is sentenced in June.
The SEC said in its complaint that Mr Friehling and his firm "did not perform anything remotely resembling an audit" of Madoff's money management firm or try to confirm that stocks that Madoff had purportedly bought for customers even existed. His attorney could not be reached immediately for comment.
Mr Friehling faces a maximum of 105 years in prison on the charges, including securities fraud, aiding and abetting investment adviser fraud and false audit reports. He surrendered to the FBI today.
The SEC said Mr Friehling "merely pretended" to conduct minimal audit procedures to make it seem as if he was auditing. Even then, he failed to adequately document his purported findings.
The criminal complaint in Manhattan federal court said Mr Friehling falsely stated that audits of Bernard L. Madoff Investment Securities LLC were conducted according to standards generally accepted in the United States.
"Friehling also falsely stated that the audit 'included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements' when in fact, no such examination ever took place," the complaint said.
Authorities said Friehling's fraud ran from 1991 to 2008, and according to the SEC, he "essentially sold his license to Madoff for more than 17 years while Madoff's Ponzi scheme went undetected." In a Ponzi scheme, early investors are paid with money from new clients.
Reuters