Madoff's Auditor Denies He knew Of Ponzi Scheme

by Brian Reed

November 4, 2009

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November 4, 2009

Bernard Madoff's longtime auditor pleaded guilty to securities fraud charges Tuesday, but said he did not know Madoff was running a Ponzi scheme. David Friehling's plea was part of a cooperation deal with prosecutors. He will be sentenced next year.

RENEE MONTAGNE, host:

And in other news, Bernard Madoff's longtime accountant is pleading guilty to fraud. David Friehling admits to signing off on the Madoff operation without ever actually auditing it.

NPR's Brian Reed reports.

BRIAN REED: David Friehling claims he never knew that Madoff was running a multibillion-dollar Ponzi scheme, which is exactly why Friehling was charged with fraud himself. As Madoff's auditor, it was part of his job to make sure the broker's business was legitimate. Instead, Friehling approved the records Madoff gave him without ever actually scrutinizing them.

Mr. JERRY REISMAN (Attorney): He certified that he committed an audit when, in fact, he did not.

REED: Jerry Reisman is an attorney in Garden City, New York. He represents about 25 Madoff victims.

Mr. REISMAN: If he had performed the audit, he would've been required to confer with the depository firm that allegedly held the securities owned by Madoff. And if he had made inquiry, they would've responded that they had no securities and the fraud would've been uncovered immediately.

REED: So it wouldn't have taken a lot of work for him to uncover this.

Mr. REISMAN: Perhaps just a phone call.

REED: Reisman says more people involved with the Ponzi scheme will likely be charged in the coming months. David Friehling is the third person, after Madoff and an aide, who's pleaded guilty to such charges. The accountant could face more than 100 years in prison, but he's helping investigators in the hopes of getting less jail time. Friehling's sentencing is scheduled for early next year.

Brian Reed, NPR News, New York.

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