Madoff Accountant Friehling Waives Indictment, May Plead Guilty

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Madoff Accountant Friehling Waives Indictment, May Plead Guilty


By David Glovin


July 16 (Bloomberg) -- Bernard Madoff’s accountant, David Friehling, agreed to waive an indictment, a signal that he may eventually plead guilty in a U.S. probe into the money manager’s multibillion-dollar fraud.

Prosecutors in New York yesterday filed a notice of intent to charge Friehling in what’s called a criminal information. The use of such a document means the accountant agreed prosecutors needn’t present evidence against him to a grand jury.

An “information equals the anticipated guilty plea,” said Jacob Frenkel, a white-collar criminal defense lawyer in Maryland who isn’t involved in the case. “His cooperation undoubtedly will shed light on the long-anticipated additional criminal charges against others.”

Friehling, 49, was arrested for securities fraud in March. He allegedly deceived investors by falsely certifying that he had audited the financial statements of Madoff’s firm.

The accountant hasn’t entered a formal response to the government’s allegations. His lawyer, Andrew Lankler, declined to comment. The case was assigned to U.S. District Judge Alvin Hellerstein in Manhattan. A clerk for the judge said a court appearance hasn’t been scheduled.

Frenkel said the waiver may also mean that Friehling agreed to cooperate with prosecutors against others and that a plea will come at some point in the future.

Madoff is serving 150 years in prison for defrauding investors by using money from new clients to pay off old ones. Prosecutors said Madoff, who was moved July 14 to a federal prison in Butner, North Carolina, told investors they had as much as $65 billion with Bernard L. Madoff Investment Securities LLC.

Friehling Accusations

Friehling, 49, isn’t accused of knowing about Madoff’s scheme. Rather, he allegedly deceived investors by falsely certifying that he had audited the financial statements of Madoff’s firm.

“Friehling failed to conduct audits that complied with GAAS and GAAP,” Acting U.S. Attorney Lev Dassin said in a statement when he was charged on March 18, referring to generally accepted accounting standards and principles. “He did little or no testing, no verification of the ‘facts’ he certified. His job was not merely to rubber-stamp statements he didn’t verify.”

Keith Kelly, a Federal Bureau of Investigation agent, said in the March criminal complaint that there’s no sign Friehling conducted a meaningful audit of Madoff Securities.

Friehling didn’t review material sources of firm revenue, examine a bank account through which billions of dollars of client funds flowed, or verify assets, liabilities or purported stock purchases, Kelly said.

The case is U.S. v. Friehling, 09-mag-00729, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: David Glovin in New York federal court at dglovin@bloomberg.net.

Last Updated: July 16, 2009 00:01 EDT