Federal authorities in New York arrested David Friehling, the auditor of Bernie Madoff’s phony investment company.
Oddly, however, prosecutors have not accused Friehling of knowing about the Ponzi scheme. Federal prosecutor Lev L. Dassin even went out of his way in a press release to note that Friehling is not charged with knowing about Madoff’s Ponzi scheme.
“Mr. Friehling’s deception helped foster the illusion that Mr. Madoff legitimately invested his clients’ money,” Dassin said.
Friehling is charged with securities fraud, aiding and abetting investment adviser fraud and four counts of filing false audit reports with the U.S. Securities and Exchange Commission. He faces up to 105 years in prison if he is convicted.
Friehling ran the now infamous Friehling & Horowitz three-person auditing firm, based in a New City, N.Y. strip mall, that did the accounting for Madoff’s Ponzi scheme. The other two people at the firm were a receptionist and Jeremy Horowitz, Friehling’s father-in-law who recently died in Florida.
Madoff seems to have been Friehling’s only client. He served as Madoff’s auditor for 17 years,from 1991 through 2008. Prosecutors said he made between $12,000 and $14,500 a month from 2004 to 2007, about $144,000 to $174,000 a year.
Friehling’s cozy relationship with the swindler has inspired changes in both federal and state laws regulating accountants. Formerly, accountants auditing private brokerage firms like Madoff’s did not have to register with regulators or face peer reviews. New rules require registration for all broker dealer acocuntants.