broker-dealer firm carried out partial audits and insufficient
checks on internal controls, which helped cover up a multi-billion
dollar Ponzi scheme, according to US Securities and Exchange
Commission (SEC) charges.
The US regulator alleged that from 1991 to
2008 CPA David Friehling and his firm, Friehling & Horowitz
CPAs (F&H), falsely claimed to audit financial statements and
disclosures of Bernard Madoff Investment Securities (BMIS).
The SEC previously charged Madoff and BMIS
with committing securities fraud through a multi-billion dollar
Ponzi scheme. Madoff has since pleaded guilty to 11 counts of
fraud.
The SEC claimed Friehling falsely stated that
BMIS audit reports adhered to Generally Accepted Auditing
Standards, including the requirements to maintain auditor
independence and perform audit procedures regarding custody of
securities. Friehling did not conduct audit procedures with respect
to BMIS internal controls and had no basis to claim BMIS had no
material inadequacies, the SEC added.
The auditor allegedly denied carrying out
audit work to the American Institute of Certified Public
Accountants to avoid being subject to peer reviews. Friehling and
F&H also obtained “ill-gotten gains” through compensation from
Madoff and BMIS, the SEC claimed.
The SEC is seeking financial penalties and a
court order requiring both Friehling and F&H return funds
received from BMIS.
Friehling was released on a $2.5 million bail
bond on Wednesday. He faces a maximum of 105 years in prison if
found guilty.
