Auditors that examined Bernard Madoff’s Ponzi scheme and found nothing out of the ordinary are being charged by the Securities and Exchange Commission with committing securities fraud. The SEC announced yesterday that they are taking to federal court accounting firm Friehling & Horowitz, accusing the firm as well as certified public accountant David G. Friehling of the fraud.
The claim, filed by the SEC in Manhattan federal court, alleges that Friehling and his firm gave Bernard Madoff Investment Securities a “clean bill of health” between the years of 1991 and 2008, while Madoff successfully bilked investors out of billions.
Said James Clarkson, acting director of the SEC’s New York office, “As we allege in our complaint, Friehling’s and F&H’s misconduct is egregious. Friehling essentially sold his license to Madoff for more than 17 years while Madoff’s Ponzi scheme went undetected. For all those years, Friehling deceived investors and regulators by declaring that Madoff’s enterprise had a clean audit record.”
The SEC alleges that Friehling and his firm claimed to have done a thorough audit in line with generally accepted accounting principles (GAAP), but in fact did only a superficial investigation in their 17 years of audit service. Friehling then supposedly lied to the American Institute of Certified Public Accountants, claiming that he had never conducted any kind of audit, and thus avoiding a peer review.
Friehling was released after posting his $2.5 million bail yesterday afternoon.