David Friehling, Madoff's Accountant, Surrenders to the FBI

By Thomas Zambito
Daily News Staff Writer

The accountant for mega-thief Bernard Madoff surrendered Wednesday to the FBI on charges he dispensed years of phony audits and bogus filings as the Ponzi schemer looted thousands of clients.

David Friehling, a CPA with Bernard L. Madoff Investment Securities, acted as a "rubber stamp" on paperwork sent along by Madoff - and even invested with the crooked financier.

"Mr. Friehling's deception helped foster the illusion that Mr. Madoff legitimately invested his clients' money," said acting U.S. Attorney Lev Dassin.

Authorities, who are also probing Madoff's employees and family, said the investigation into the $65 billion scam was continuing. Friehling was the first person arrested since Madoff surrendered in December.

According to a federal complaint, Friehling was responsible for auditing financial statements - including balance sheets, income statements and internal control reports.

He instead failed to "examine a bank account through which billions of dollars of [Madoff] client funds flowed," according to the criminal complaint. He routinely failed to make inquiries about the paperwork or request backup documents, the complaint said.

If the CPA had done his job, Madoff's scam and his company's insolvency would have been obvious, said James Clarkson, acting head of the Securities and Exchange Commission's New York office.

"Friehling's conduct is egregious," Clarkson said. "Freihling essentially sold his license to Madoff for more than 17 years while Madoff's Ponzi scheme went undetected."

The SEC smacked Friehling with a civil lawsuit claiming his accounting firm never even checked if Madoff was investing money for thousands of customers.

Friehling worked for Madoff between 1991 and 2007, earning up to $14,500 a month while working out of a storefront office in Rockland County.

Friehling, 49, faces up to 105 years in prison. Authorities said he was unaware of the Ponzi scheme, although his failure to conduct "a meaningful audit" of Madoff's company allowed the scam to flourish.

"His job was not merely to rubber stamp statements he didn't verify," said FBI Assistant Director Joseph Demarest. "Simply put, Friehling failed to do his job and lied to investors and regulators in saying he did."

The defendant was due in Manhattan Federal Court later Wednesday.

He is charged with securities fraud, aiding and abetting investment adviser fraud and four counts of filing false audit reports with with the Securities and Exchange Commission.

Madoff pleaded guilty last week to ripping off thousands of investors in the largest financial fraud in U.S. history. Those investors included Friehling, the complaint said.

An FBI review of Madoff files showed that between 1995 and 2007, Friehling's account with Madoff's firm showed an equity balance of more than $500,000.

The SEC charged that Friehling, in addition to his salary with Madoff, earned ill-gotten cash by withdrawing returns from accounts in his name and the names of some of his relatives.

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