With Madoff in jail, it is time for the rest of his crew of fraudsters to join him. Next up….
David G. Friehling, the sole practitioner at Friehling & Horowitz, CPAs, PC, has been charged with securities fraud, aiding and abetting investment adviser fraud and four counts of filing false audit reports with the Securities and Exchange Commission. The complaint alleges that Friehling enabled Madoff’s Ponzi scheme by falsely stating that the firm had audited the financial statements. Friehling & Horowitz also made representations that Friehling reviewed internal controls, including controls over the custody of assets, and found no material inadequacies. The complaint alleges that all of these statements were materially false because Friehling did not perform a meaningful audit. The SEC alleges that (1) Friehling merely pretended to conduct minimal audit procedures to make it seem like he was conducting an audit, (2) he failed to document his findings and conclusions, and (3) if properly stated, those financial statements would have shown that Madoff owed tens of billions of dollars in additional liabilities to its customers.
“Although Mr. Friehling is not charged with knowledge of the Madoff Ponzi scheme, he is charged with deceiving investors by falsely certifying that he audited the financial statements of Mr. Madoff’s business,” said acting U.S. Attorney Lev Dassin.
If you are wondering about the Horowitz half of Friehling & Horowitz, he was apparently the Madoff auditor for many years before handing the account to his son David G. Friehling in the early 1990’s. If Madoff’s wrongdoing goes far enough back, Horowitz may need to worry about ending up in a prison cell next to his son-in-law. (UPDATE: Maybe not, since he passed away recently.)
- SEC Press Release
- Complaint filed in US v. Friehling – hosted on JD Supra
- SEC Charges Madoff Auditors With Securities Fraud, “Pretending” to Perform Audit
by Bruce Carton of Securities Docket
- Madoff Accountant Charged With Fraud by Chad Bray for WSJ.com
- Madoff’s auditor… doesn’t audit? by Alyssa Abkowitz for Fortune
- Suspiciously Tan, Buff Madoff Accountant Arrested, Faces 105 Years by Owen Thomas for Gawker