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SEC charges Madoff accountant with fraud

By Bernard Hibbitts (editor) and University of Pittsburgh School of Law students.

[JURIST] The US Securities and Exchange Commission (SEC) on Wednesday charged accountant David Friehling with fraud for his alleged role in the securities fraud scheme committed by financier Bernard Madoff. In the complaint, the SEC alleges that Friehling and his accounting firm made fraudulent representations that they had audited Madoff's records in accordance with Generally Accepted Auditing Standards, even though they had not, that these misrepresentations had enabled Madoff's scheme, and that the firm profited from the fraud. Because of these allegations, Friehling faces charges under the Securities Act, the Exchange Act, and the Advisers Act. If found guilty, he faces up to 105 years in prison and would have to return any profit he made from the fraud. Last week, Madoff pleaded guilty to 11 charges of securities fraud. Last month, Madoff consented to a partial judgment with the SEC over civil charges brought by the SEC to obtain a preliminary injunction and asset freeze against him. The same day, SEC Division of Enforcement Director Linda Thomsen announced she was stepping down from her post. In the week following Madoff's charges, SEC Chairman Christopher Cox said that he would launch an immediate investigation into how the fraud allegedly perpetrated by Madoff went undetected for so long. In December, then-President-elect Barack Obama named Mary Schapiro as the SEC Chairman, replacing Cox.

Full post as published by JURIST - The Paper Chase on March 18, 2009 (boomark / email).