- David G. Friehling
David G. Friehling is an American accountant who was arrested and charged in March 2009 for his role in the Madoff investment scandal. He later plead guilty to these charges.
Friehling was born in Sullivan County, north of New York City, and attended high school in Liberty, New York. His affluent family owned the Stevensville Hotel, a prominent Borscht Belt resort in Swan Lake, New York. He is a 1981 graduate of Cornell University, and a past-president of the Rockland chapter of the NYS Society of CPAs (NYSSCPA).
Friehling & Horowitz as Madoff's auditors
For many years, Bernard L. Madoff Investment Securities LLC books were audited by Friehling & Horowitz, a little-known accounting firm in New City, New York; a small town north of New York City. The firm consisted of two principals—Friehling and Jerome Horowitz—and a secretary.
Horowitz met Madoff in 1963, when the Madoff organization was a penny stock trader. He audited Madoff's books before retiring to Palm Beach Gardens, Florida in 1991 and handing the account to his son-in-law, Friehling. Horowitz died on March 12, 2009 after a long battle with cancer; it is not known whether he was a target of the Madoff investigation.
Well before the Madoff scandal broke, several observers doubted that a tiny firm with only one active accountant could competently service a firm that had grown into a multi-billion-dollar operation. In 2007, Askia LLC, a hedge fund consultant, warned its clients to stay away from Madoff for that very reason; its CEO, Jim Vos, likened this situation to General Motors being audited by a three-person firm. Others were suspicious that Madoff refused requests for due dilligence because his accountant—supposedly his brother-in-law—was the only one allowed to see the books.
Soon after the Madoff scandal broke, it emerged that Friehling & Horowitz had informed the American Institute of Certified Public Accountants in writing since 1993 that it didn't conduct audits. An investigation into Friehling by Rockland County district attorney Thomas Zugibe was stopped in deferral to the investigation by the United States Attorney for the Southern District of New York.
Friehling was not registered with the Public Company Accounting Oversight Board, which was created under the Sarbanes-Oxley Act of 2002 to help detect fraud. Nor was the firm "peer reviewed," in which auditors check one another for quality control. According to the AICPA, Friehling was enrolled in their peer-review program, but was not required to participate because he supposedly didn't conduct audits. It later emerged that Madoff's banker, JPMorgan Chase, had known that Friehling wasn't registered with the PCAOB or subject to peer review as early as 2006.
Arrest and plea
Friehling was charged on March 18, 2009, with securities fraud, aiding and abetting investment adviser fraud, and four counts of filing false audit reports with the Securities and Exchange Commission.
On July 10, 2009, Friehling waived indictment and pleaded not guilty to criminal charges. He agreed to proceed without having the evidence in the criminal case against him reviewed by a grand jury at a hearing before U.S. District Judge Alvin Hellerstein in Manhattan.
On November 3, 2009 he pled guilty to the charges against him. He admitted to simply rubber-stamping Madoff's filings with the SEC. He also revealed that he continued to audit Madoff even though he had invested a substantial amount of money with him. Accountants aren't allowed to audit broker-dealers with whom they're investing. He agreed to forfeit $3.18 million in accounting fees and withdrawals from his account with Madoff. Friehling faces a maximum sentence of 108 years in prison, but unlike Madoff has agreed to cooperate with the government. His career as an accountant is likely over in any event; the SEC is not allowed to accept audits from convicted felons.
Friehling's sentencing has been set for September 3, 2010. It was postponed from February 2010 at the request of the prosecution, citing Friehling's "continuing cooperation with the Government". That was postponed until September 2010….that was then postponed until March 15, 2011….now that has been postponed until September 16, 2011. 
- ^ Chung, Joanna (March 22, 2009). "Madoff investigation is far form over". Financial Times. http://www.ft.com/cms/s/0/fc66f50a-1719-11de-9a72-0000779fd2ac.html. Retrieved March 22, 2009
- ^ http://www.recordonline.com/apps/pbcs.dll/article?AID=/20090322/NEWS/903220321
- ^ a b Hamblett, Mark. Madoff's Accountant Acknowledges Guilt, Casts Himself as Victim. New York Law Journal, 2009-11-04.
- ^ Arrested Madoff accountant had Palm Beach Gardens partner. Palm Beach Post, 2009-03-04.
- ^ Fitzgerald, Jim. Madoff's financial empire audited by tiny firm: one guy. Associated Press via Seattle Times, 2008-12-18.
- ^ Markopolos, Harry (March 2010). No One Would Listen: A True Financial Thriller. Hoboken, New Jersey: John Wiley & Sons. ISBN 978-0-470-55373-2. http://www.wiley.com/WileyCDA/WileyTitle/productCd-0470553731.html.
- ^ a b Abkowitz, Alyssa (December 17, 2008). Madoff's auditor... doesn't audit?. CNN. http://money.cnn.com/2008/12/17/news/companies/madoff.auditor.fortune/index.htm. Retrieved March 22, 2009
- ^ Voreacos, David (December 16, 2008). "New York Prosecutor Drops Madoff Auditor Probe; Defers to U.S.". Bloomberg News. http://www.bloomberg.com/apps/news?pid=20601087&sid=aAeIQnSSpJRQ&refer=home. Retrieved December 24, 2008.
- ^ Dugan, Ianthe Jeanne; Crawford, David (February 18, 2009). "Accounting Firms That Missed Fraud at Madoff May Be Liable". The Wall Street Journal. http://online.wsj.com/article/SB123491638561904323.html. Retrieved March 22, 2009
- ^ Madoff trustee suit against JPMorgan Chase
- ^ Bray, Chad (July 18, 2009). "Madoff Ex-Auditor Friehling Enters a Plea of Not Guilty". The Wall Street Journal. http://online.wsj.com/article/SB124784585862258641.html.
- ^ United States v. David Friehling – Court’s Order Adjourning Sentencing to Sept. 3, 2010, United States v. David G. Friehling, The United States Department of Justice, retrieved 2010-07-25
- ^ Pavlo, Walter. Forbes. http://blogs.forbes.com/walterpavlo/2011/03/21/madoff-accountant-now-auditing-to-save-his-a/.
- ^ http://sec.gov/news/press/2009/2009-60.htm
- ^ Efrati, Amir (March 19, 2009). "Accountant Arrested for Sham Audits". The Wall Street Journal. http://online.wsj.com/article/SB123738779664971505.html.
Madoff investment scandal Scams and confidence tricks Terminology Notable scams and confidence tricks
- Advance fee fraud
- Art student scam
- Badger game
- Black money scam
- Bogus escrow
- Boiler room
- Charity fraud
- Clip joint
- Coin rolling scams
- Drop swindle
- Embarrassing cheque
- Employment scams
- Fiddle game
- Fine print
- Foreclosure rescue scheme
- Forex scam
- Fortune telling fraud
- Get-rich-quick scheme
- Green goods scam
- Intellectual property scams
- Kansas City Shuffle
- Long firm
- Miracle cars scam
- Mock auction
- Patent safe
- Pig in a poke
- Pigeon drop
- Ponzi scheme
- Pump and dump
- Pyramid scheme
- Reloading scam
- Shell game
- Slavery reparations scam
- Spanish Prisoner
- Strip search prank call scam
- Swampland in Florida
- Telemarketing fraud
- Thai gem scam
- Thai tailor scam
- Thai zig zag scam
- Three-card Monte
- Trojan horse
- White van speaker scam
- Work-at-home scheme
Internet scams and countermeasures
- Advance-fee fraud
- Avalanche (phishing group)
- Click fraud
- Computer crime
- Domain slamming
- E-mail authentication
- E-mail fraud
- El Gordo de la Primitiva Lottery International Promotions Programmes
- Employment scams
- Internet vigilantism
- Lottery scam
- Referer spoofing
- Ripoff Report
- Rock Phish
- Romance scam
- Russian Business Network
- Scam baiting
- Spoofed URL
- Spoofing attack
- Stock Generation
- Cramming (fraud)
Pyramid and Ponzi schemes Confidence tricks in media
- See also: List of real-life con artists
- List of confidence tricks
- List of Ponzi schemes
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