Madoff's accountant pleads guilty in 65-billion-dollar scheme

Nov 3, 2009, 17:44 GMT

New York - The accountant for convicted fraudster Bernard Madoff Tuesday pleaded guilty to nine criminal counts related to the investor's 65-billion-dollar rip-off scheme.

David Friehling, 49, became the third person convicted in the international Ponzi scheme that started unravelling in December 2008, just as the world economy was in the depths of recession.

The accountant, who faces more than 100 years in prison, agreed to cooperate with federal prosecutors and investigators in their probe and could get leniency for his cooperation, Bloomberg financial news service reported.

Friehling pleaded guilty in a federal court in Manhattan to securities fraud, investment adviser fraud and obstructing tax law administration.

Madoff, 71, who led the scheme for decades, is serving 150 years in prison and aide Frank DiPascali is in jail awaiting sentencing.

In his scheme, Madoff gave handsome pay-offs to earlier investors with money from new investors. Through fake paperwork, his company perpetuated the appearance he had invested in actual stocks or financial instruments.

Despite probes dating back to 1992 by the Securities Exchange Commission (SEC), which regulates Wall Street, into complaints about Madoff's operations, investigators failed to uncover the enormous rip-off scheme.

In jailhouse interviews with the SEC to understand how their agents missed the fraud, Madoff has described how they failed to check basics like his account with Wall Street's central clearing house and his dealings with the firms that were supposedly handling his trades.

'If you're looking at a Ponzi scheme, it's the first thing you do,' he said, according to transcripts of the SEC's investigation reported by The New York Times last week.

Madoff described how on two occasions, he thought it would be only days before he would be caught. But the investigators failed to check out his clearinghouse account, even though Madoff had given them the details.

'That was the nightmare I lived with,' Madoff was quoted as saying. 'I wish they caught me six years ago, eight years ago.'