Madoff's accountant arrested, charged with fraud

Mar 18, 2009, 18:11 GMT

Washington - Disgraced financier Bernard Madoff's accountant was on Wednesday arrested and charged with securities fraud, the Justice Department said.

David G Friehling, 49, surrendered to authorities Wednesday morning and is the first accused accomplice of Madoff to be arrested since the 50-billion-dollar scandal came to light three months back.

An accountant for Bernard L Madoff Investment Securities LLC, Friehling faces a maximum 105 years in prison.

He wasn't charged with knowledge of Madoff's 'Ponzi' scheme, under which the financier was able to offer his investors handsome returns by continually collecting fresh funds from new clients rather than from any actual profits earned.

But he was charged with 'deceiving investors by falsely certifying that he audited the financial statements' of Madoff's business, said Lev L Dassin, acting US attorney for the southern district of New York.

'Mr Friehling's deception helped foster the illusion that Mr Madoff legitimately invested his clients' money,' Dassin said in a statement.

Prosecutors said Friehling failed to conduct audits that complied with accepted accounting principles and standards.

'As a purported independent auditor, Friehling had a fiduciary responsibility to investors, and a legal obligation to regulators, to report the truth,' said Joseph M Demarest, FBI assistant director-in- charge.

'He did little or no testing, no verification of the 'facts' he certified. His job was not merely to rubber-stamp statements he didn't verify,' Demarest said.

Madoff, 70, pleaded guilty in a lower Manhattan federal court last Thursday to all 11 criminal counts related to a 50-billion-dollar fraud and could be sentenced to 150 years in jail for one of the largest financial swindles in history.

He is to be sentenced on June 16.

'As I engaged in my fraud, I knew what I was doing was wrong, even criminal,' Madoff said in his plea, adding that he 'knew this day would inevitably come' after he found himself unable to wind down the so-called Ponzi scheme.

The investor was jailed after his plea. He had been under house arrest since January at his luxurious Upper East Side Manhattan home on 10-million-dollars bail - a court decision that provoked outrage among his many victims.

Madoff was charged with securities fraud, mail fraud, wire fraud, three counts of money laundering and filing false statements with the Securities and Exchange Commission.