Madoff Accountant—David Friehling—Charged

In the continuing investigation into <"">Bernard Madoff’s financial activities, Madoff’s accountant for nearly two decades—David Friehling—was charged with securities fraud, reports USA Today, citing a federal prosecutor. Friehling, who pleaded not guilty, was Madoff’s accountant for 17 years. Madoff was recently sentenced to 150 years in a North Carolina prison for running a Ponzi scheme that is estimated to have cost investors as much as $65 billion.

The charges against Friehling included aiding and abetting investment adviser fraud and four counts of filing false audit reports with the Securities and Exchange Commission (SEC) the New York’s southern district acting U.S. attorney, Lev Dassin said, according to USA Today. Citing the criminal information, USA Today reported that Friehling allegedly “falsely certified” he prepared and audited Madoff’s investment company’s—Bernard L. Madoff Investment Securities LLC—financial statements. Such information would include, said USA Today, cash flows, income statements, and balance sheets, to name a few.

Had Friehling actually been operating as a bona fide accountant, the financial statements would have indicated Madoff’s company was not only insolvent, but that it owed billions to its customers, USA Today pointed out.

The SEC has come under fire for apparently missing warnings that something was amiss with Madoff’s investment advisory business and has been shamed for its inability to detect Madoff’s fraud and its role in the well-publicized investment bank collapse, which has been blamed—in part—for the current financial downturn, said the Washington Post previously.

Friehling was Madoff’s auditor from 1991 to 2008, said the Associated Press (AP), which also reported that prosecutors were granted additional time to work on a potential plea bargain with the disgraced financier’s former accountant.

Earlier this month we reported that Madoff’s monumental Ponzi scheme was likely involved in the pending departure of a key SEC official. According to, Lori Richards, director of the SEC’s Office of Compliance Inspections and Examinations, was widely criticized for missing warning signals about Madoff. Richards will be leaving her post—which she has held since 1995—on August 7; Richards’ department was responsible for overseeing money managers like Madoff. In the wake of the Madoff scandal, the SEC’s former Enforcement Director Linda Thomsen resigned in February.

As we’ve reported previously, money manager Harry Markopolos claimed he tried to warn the SEC numerous times over several years about Madoff. According to Bloomberg, Markopolos said that SEC inspectors lack knowledge about products such as derivatives and have inadequate understanding of the businesses they are supposed to review.

Also, Attorney Genevievette Walker-Lightfoot was an SEC investigator who claimed to have warned her superiors in 2004 about concerns she had with Madoff’s firm, said the Washington Post earlier this month. She sent emails to a supervisor about her concerns with the disgraced financer’s activities and developed some questions to ask his firm, reported the Post previously, which said some questions confronted some of Madoff’s actions, which were later connected to the scandal. Because the SEC was consumed with issues surrounding mutual funds, Walker-Lightfoot was forced to concentrate on nonMadoff issues, said the Post.

Over two-decades, the SEC allegedly investigated Madoff’s business five times, never finding the massive fraud even after Walker-Lightfoot expressed concerns and others stepped forward, noted the Post.

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