Madoff auditor pleads to 'biggest mistake'

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By Larry Neumeister ASSOCIATED PRESS

NEW YORK | Bernard Madoff's longtime auditor pleaded guilty to securities-fraud charges Tuesday, 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 U.S. District Court in Manhattan, apologizing to the thousands of victims who lost billions of dollars while he audited Madoff's financial records from 1991 to 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."

He said that if he had known that investor money was not properly invested, he would not have poured his family's savings, including the college funds for three children - ages 17, 20 and 24, into Madoff's investment business.

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. Judge Hellerstein provided an opportunity for investors to speak at the proceeding, but no one asked to do so.

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 prison term of up to 114 years, though substantial cooperation with prosecutors can result in significant leniency.

A tentative sentencing date was set for Feb. 26, but it is unlikely that Friehling will be sentenced until he completes his cooperation with prosecutors, which will include divulging any crimes by others he knows about and testifying before grand juries investigating the fraud.

Friehling remains free on $2.5 million bail. His attorney, Andrew Lankler, declined to comment after the plea.