Madoff’s Accountant Arrested – Who’s Going To Be Next?

Bernard Madoff has been in jail for a week now, and let’s hope he and Arthur Nadel are chess partners or something and he’s having a nice time. On the outside meanwhile, the fallout from his epic Ponzi scheme continues to ebb around, with the latest news being that his accountant, David Friehling, has been arrested.

Friehling is accused of aiding Madoff by conducting “audits” that probably just involved flicking through sheets at high speed and saying “this looks fine”, before heading for lunchtime cocktails. He then didn’t even file the findings of the “pretend” audits. All this doesn’t exactly reflect well on the SEC, the regulators who didn’t spot Madoff’s fraud – if his accountant isn’t even filing audits that were made up in the first place, from an office in a tiny New York town rather than a city-base firm, you might have expected some sort of red flag to come up, but no.

Friehling, whose son recently and rather pathetically covered Fox News’s car in water, had accounts with Madoff reportedly worth $14m. If he pleads not guilty, it means he’s saying that he innocently deposited $14m with Madoff despite having access to his books – so it’s a choice between being guilty or the stupidest person ever. Rock – Friehling – hard place.

But while Friehling is the only person other than Madoff to be charged over the scandal, people are starting to wonder who else might be involved. His quick confession, and assertions that his sons were working on the legit side of the business and that he employed staff that were underqualified so as to avoid suspicion, seem to be trying to prevent anyone else getting implicated. Now his family are retrenching – Ruth Madoff’s official main residence is now this Floridian mansion, in an effort to legally protect it from creditors. She and Peter Madoff, Bernie’s bro, originally applied for the homestead exemption that protects their properties in this way back in 2006, just as the SEC was beginning their investigation of the firm. Ruth also reapplied for the homestead exemption just two months before Bernie’s arrest. Looks like they knew something was up. There’s also debate about exactly when Peter was told about the scheme by Bernie – if it was the day before Bernie told his sons, why didn’t he tell anyone?

Other potential arrestees include Madoff’s “chief financial officer” Frank DiPascali; Alvin Delaire and Marcia Cohn, executives at Madoff’s brokerage firm Cohmad that channelled funds from investors; Robert Jaffe, the head of Madoff’s Boston brokerage firm, who has already nearly got smacked in the chops over the scandal, and probably would have been were it not for the intervention of Donald Trump (bizarre, I know); and Enrica Pitz, the controller of Madoff Investment Securities who signed off a number of Madoff’s cheques. 

Madoff fans can slake their thirst for the scandal at great length in a predictably excellent Vanity Fair piece from this month. Highlights include sugar grand-daddy Norman Levy wooing his broke paramour with $100,000 to invest with Madoff – it’s the gift that keeps on giving! Or not. The aforementioned recipient, Carmen Dell’Orifece, paints Madoff as a sweet humble Queens boy who looked after his friends. ”Madoff in a silly paper hat, his calves showing, lounging on a divan…’This was their idea of fun’”, she says. “Bernie knew about piracy, because he was an oceangoing person”, she says at one point – we also learn he likes Neil Diamond and Diet Coke. This contrasts with what people who dealt with him on a professional basis have to say: obsessive-compulsive, “not someone you would want to have a beer with”.

There’s a bit about the extended Madoff clan, including the daughter-in-law who appeared in a bikini for a fly-fishing mag. And there’s a great description of the sickening panic that set in with investors, culminating in a crazed charity ball – “She said it was like the Titanic going down – people screaming and yelling. She had never seen such emotion…Everybody was drunk – people that don’t drink – like their lives were over.”

Posted by Ben Beaumont-Thomas in Hot Money | March 19, 2009 2:24PM |