JURIST - Paper Chase: SEC charges Madoff accountant with fraud

[JURIST] The US Securities and Exchange Commission (SEC) [official website] on Wednesday charged [complaint, PDF; press release] accountant David Friehling with fraud for his alleged role in the securities fraud scheme committed by financier Bernard Madoff [JURIST news archive]. 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 [text, PDF], 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 [15 USC § 77 text], the Exchange Act [15 USC § 78 text], and the Advisers Act [15 USC § 80 text]. 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 [JURIST report] to 11 charges of securities fraud [complaint, PDF; JURIST report]. Last month, Madoff consented [JURIST report] to a partial judgment [SEC press release] 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 [SEC press release]. In the week following Madoff's charges, SEC Chairman Christopher Cox [official profile] said that he would launch an immediate investigation [press release; JURIST report] into how the fraud allegedly perpetrated by Madoff went undetected for so long. In December, then-President-elect Barack Obama [official profile] named [press release] Mary Schapiro [professional profile] as the SEC Chairman, replacing Cox.

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