New City resident David Friehling is the first of who-knows-how-many who will be charged in connection with Bernard Madoff's $65 billion Ponzi scheme.
New City resident David Friehling is the first of who-knows-how-many who will be charged in connection with Bernard Madoff's $65 billion Ponzi scheme.
Friehling owned and operated Friehling & Horowitz of New City, housed in a tiny office in a strip mall. He served as Madoff's auditor for about 17 years, taking in about $14,000 a month in fees from the operation, prosecutors say.
Friehling is not accused of knowing about the scheme. But he is charged with deceiving investors by certifying that he had audited Madoff's books when, his accusers say, he hadn't. Even if Friehling himself is among the deceived - a notion that would imply that he was really, really bad at his job - investigators from the FBI, Securities and Exchange Commission, and U.S. Attorney's Office maintain that Friehling fostered Madoff's scam because he gave it the veneer of legitimacy. Essentially, the charges call his failure to do his job criminal. The scores of Madoff victims who blithely believed that they were headed toward a comfortable retirement, only to find they were destitute, likely would agree.
With the Madoff scandal, the AIG bailout-bonus flap and the general meltdown of the financial system, the list of those accused of "failure to do their job" grows by the day. As does the list of those charged with deliberate fraud, like the two top aides to former New York Comptroller Alan Hevesi who were arrested on Thursday. State Attorney General Andrew Cuomo said that the aides, Hank Morris and David Loglisci, got millions of dollars in kickbacks from investment firms that wanted a piece of state pension fund action.
Meanwhile, the fact that Friehling's one-man auditor operation keeping tabs on a huge operation like Madoff Securities didn't raise regulators' questions is, at the least, surprising. Upsetting is the fact that SEC regulators for years missed red flags that could have uncovered Madoff's swindling.
In the last months, the public has heard about government ignoring signs of corporate malfeasance, taking a powder on stronger regulations, pleading ignorance on AIG bonuses paid with government bailout money and who knows what could come. At the least, just because government officials may not have realized the impact of their ignorance, they shouldn't be allowed to skate from responsibility. Just as the charges against Friehling assert, failing to actually do a job won't protect you from accountability.
The 49-year-old is free on $2.5 million bail. The federal complaint charges Friehling with securities fraud, aiding and abetting adviser fraud, and four counts of filing false audit reports with the SEC. If found guilty, he faces up to 105 years in prison. The SEC also has filed a civil lawsuit against Friehling, charging him with securities fraud, including falsely stating he had audited Madoff's enterprises.
A Journal News editorial
