Among the tragedies inflicted on thousands of victims by Bernard Madoff was that perpetrated on a tiny accounting firm in New City, N.Y., a hamlet some 30 miles north of New York City.
The firm was Friehling & Horowitz CPAs. Jeremy Horowitz was David Friehling's father-in-law. The firm occupied a 500-square-foot office in a New City strip mall.
Friehling & Horowitz's practice consisted of small clients, with one exception: Bernard L. Madoff Investment Securities LLC, which paid a fee of $12,000 to $14,000 each month - and probably more over the years.
The Madoff firm was registered with the Securities and Exchange Commission and was required to file annual reports with the SEC. Friehling & Horowitz prepared the independent accountant's report, which was included in the corporation's annual submission to the SEC.
When the Bernard Madoff Ponzi scheme exploded and Madoff was arrested, the accountant's report by Friehling & Horowitz was thoroughly scrutinized by the SEC. It was soon discovered that the assets and liabilities of Bernard L. Madoff Investment Securities LLC were not confirmed by Friehling & Horowitz and that an audit had not been conducted.
Jeremy Horowitz, who had been Madoff's longtime personal accountant, died at age 80 the very day Bernard Madoff pleaded guilty to running a worldwide fraud.
David Friehling was accused of violating rules and regulations of the SEC and was arrested shortly afterward. He was held on $2.5 million bail and was later released by a security bond.
Members of the Friehling and Horowitz families had invested with Madoff, which was a violation of accountants' independence rules.
If Friehling is found guilty by a judge or a jury, he will most likely serve time in a federal penitentiary.
This writer spoke to a colleague in the Rockland County community who knew Friehling and described him as an "average fellow," with a "nice" home and a "nice" family.
Bernard Madoff had seduced a tiny accounting firm in New City, N.Y., with large fees.
Nobel Prize winner Elie Wiesel, who lost millions investing with Madoff, suggested that Madoff be sentenced to solitary confinement with a flashing screen depicting the photos of his victims.
Others have recommended harsher terms, but Madoff's clever lawyers may arrange a more comfortable abode.
The harm that Madoff has caused is indescribable, but why he chose a tiny CPA firm to do his dirty work is a manifestation of his warped psyche.
Eli Mason, CPA, is a past president of the New York State Society of CPAs, a past chairman of the New York State Board for Public Accountancy, and a past vice president of the American Institute of CPAs.
(c) 2009 Accounting Today and SourceMedia, Inc. All Rights Reserved.
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