Bernie Madoff's accountant charged with fraud

March 18, 2009 9:10:44 AM PDT
Bernard Madoff's longtime accountant was arrested on fraud charges Wednesday, accused of aiding the man who has admitted cheating thousands of investors out of billions of dollars in the past two decades. [SIGN UP: Get headlines and breaking news sent to you]

The charges against David Friehling, 49, come as federal authorities turn their attention to those who they believe helped Madoff fool 4,800 investors into thinking that their longtime investments were growing comfortably each year. Friehling is the first person to be arrested since the Madoff scandal broke three months ago.

Friehling ran an accounting office in a nondescript suburban building north of New York City, and quickly drew scrutiny. Experts in accounting said it would be preposterous for such a tiny firm to audit properly an operation the size of Madoff's.

He had served as Madoff's auditor from 1991 through 2008 while he worked at the sole practitioner at Friehling & Horowitz. He was paid a tidy sum by Madoff: Prosecutors said he made between $12,000 and $14,500 a month from 2004 to 2007, or $144,000 to $174,000 a year.

Friehling faces up to 105 years in prison if he is convicted. He 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.

Friehling's lawyer, Andrew Lankler, did not immediately return a phone call Wednesday.

Acting U.S. Attorney Lev L. Dassin said in a release that Friehling is not charged with knowing about Madoff's Ponzi scheme -- early investors being paid with money raised from new investors.

However, Dassin said: "Mr. Friehling's deception helped foster the illusion that Mr. Madoff legitimately invested his clients' money."

Madoff, 70, pleaded guilty to securities fraud, perjury and other charges on Thursday and was immediately sent to prison to await a June sentencing, when he faces up to 150 years in prison.

During his plea, Madoff said he began a Ponzi scheme in the 1990s in response to the pain of a recession, thinking it would be a shortlived solution. He said he never recovered, though, and knew prison awaited him.

As recently as November, Madoff notified investors that they had about $65 billion in their accounts. Investigators say they have recovered only about $1 billion.

Prosecutors have said they believe Madoff's fraud started in the 1980s.

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