Bernard Madoffs former accountant David Friehling pleaded not guilty to fraud charges.
Friehling waived his right to a grand jury hearing last week and opted for a more simplified information proceeding, prompting observers to speculate that he would plead guilty.
He may still negotiate a plea deal with prosecutors, but on Friday, prosecutors filed a criminal information in Manhattan federal court charging Friehling with securities fraud, aiding and abetting investment adviser fraud, and four counts of filing false audit reports with the SEC. The information also contains an allegation requiring the forfeiture of all of Friehlings proceeds from the alleged securities fraud.
Friehling was a partner with his father-in-law, the late Jerome Horowitz, in the New City, N.Y., accounting firm of Friehling & Horowitz, which acted as the auditor for Madoff for decades. Friehling took over the firm after Horowitz retired to Florida.
Prosecutors have accused the firm of not performing audits of Madoffs investment management firm, Bernad L. Madoff Investment Securities, even though Friehling regularly signed off on the audits.
From 1991 through 2008, Friehling was paid by BLMIS purportedly to audit BLMISs financial statements that were filed with the SEC and sent to BLMIS clients. Friehling falsely certified that he had prepared and audited those financial statements, including balance sheets, statements of income, statements of cash flows and reports on internal control, in accordance with generally accepted auditing standards and in conformity with generally accepted accounting principles, according to prosecutors.
However, prosecutors say he failed to conduct audits that complied with GAAS and GAAP and also failed to test internal controls as required under GAAP and GAAS standards. Friehling also failed to maintain the requisite professional independence from his audit client, BLMIS, because he and his wife maintained an account with BLMIS that had a balance in excess of $500,000.
Friehling, 49, faces a statutory maximum sentence of 105 years in prison. At the information proceeding on Friday, he simply replied, Not guilty, when asked by the judge for his plea.
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