Madoff’s Accountant Charged
Left hand, meet right hand. Right hand, meet left hand.
From Business Week: Prosecutors charge Madoff’s accountant with fraud
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.
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….
How did it happen? Apparently, Friehling was on the one hand “pretending” to do at least some minimal sort of audit. But apparently not telling the people who could have checked his work:
The SEC accused Friehling of lying to the American Institute of Certified Public Accountants for years, denying he conducted any audit work, because he was afraid that his work for Madoff would be subject to peer review.
In other words, the left hand (AICPA) wasn’t in communication with the right hand (investors). Essentially, Friehling was flying under the radar of professional peer-review; no one checks your work if no one knows you’re doing the work. I sense an opportunity for a regulatory connecting of dots, here.
—–
Addendum: The fact that AICPA was in the dark came out back in December. See CNN Money: Madoff’s auditor… doesn’t audit?.
Just a sec …. we have a guy putting his name and firm to the financial statements, returns etc. of a very serious business – a business that is in a specialist and high risk area. Are we being told that the SEC did not at least once check (that is look at the members’ listing on the web) with the AICPA that he was an auditor? Sorry, what basic fraud training do the regulators have? A first year professional accountant trainee will tell you that a high profile business with a low profile auditor is beginning to smell.
Good point. And the SEC had “investigated” him as far back as 1992.
There is something wrong with this story, in my opinion.The time period is too long for this type of simple error to have gone undetected by any potential investor.
Well I guess the other question is who else will be exposed as part of the secheme?