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Madoff auditor pleads guilty

Denies knowledge of Ponzi scheme

Bernard Madoff’s auditor David Friehling (left) exited Manhattan federal court yesterday in New York after pleading guilty to securities fraud and other charges. Bernard Madoff’s auditor David Friehling (left) exited Manhattan federal court yesterday in New York after pleading guilty to securities fraud and other charges. (Louis Lanzano/ Associated Press)
By Larry Neumeister
Associated Press / November 4, 2009

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NEW YORK - Bernard Madoff’s longtime auditor pleaded guilty to securities fraud charges yesterday, saying he failed to do his job to verify the disgraced money manager’s financial records but did not know Madoff was running history’s biggest Ponzi scheme.

David Friehling, 49, entered the plea in US District Court in Manhattan, apologizing to the thousands of victims who lost billions of dollars while he audited Madoff’s financial records between 1991 and 2008. The plea was part of a cooperation deal with prosecutors.

“In what was the biggest mistake of my life, I put my trust with Bernard Madoff,’’ Friehling told Judge Alvin K. Hellerstein.

Before he explained his crimes to the judge, he said he wanted to make clear: “At no time was I ever aware Bernard Madoff was engaged in a Ponzi scheme.’’

But he admitted that he took the financial records handed him by Madoff “at face value,’’ failing to independently verify the assets of Madoff’s investment company or ensure that his bank account records or charts listing the purchase of securities were accurate.

He said he also prepared personal tax returns for Madoff that he knew were not accurate.

As part of his statement supporting his guilty plea, he apologized to Madoff’s investors for his role in the fraud.

Friehling’s statement was made to support his guilty plea to charges of securities fraud, investment adviser fraud, making false filings with the Securities and Exchange Commission, and obstructing or impeding the administration of the Internal Revenue laws.

The charges carry a potential prison term of up to 114 years, though substantial cooperation with prosecutors can result in significant leniency.