Thursday, April 2, 2009

Why Friehling?

"Bernard Madoff's accountant for nearly two decades was yesterday charged with fraud as US prosecutors widened their investigation into one of the biggest investment frauds in history. ... 'Friehling essentially sold his license to Madoff for more than 17 years while Madoff's "Ponzi" scheme went undetected,' alleged James Clarkson, acting director of the New York regional office of the [SEC], which filed separate civil charges against him. ... Mr. Friehling 'enabled' Mr. Madoff's misconduct by falsely representing to investors that his firm was financially sound, the SEC claimed in its complaint. Mr. Friehling 'merely pretended' to conduct minimal audit procedures and 'even then failed to document his purported findings.' The SEC complaint alleges that Mr. Friehling did not maintain independence from Mr. Madoff's firm, which retained him from at least 1991. .... Lev Dassin, acting US attorney for the [SDNY], said that Mr. Friehling's 'deception helped foster the illusion that Mr. Madoff legitimately invested his client's money'," my emphasis, Joanna Chung at the FT, 19 March 2009.

"Authorities said that if Friehling had done his job, Madoff's financial statements would have shown his company owed tens of billions to his customers and was insolvent", Larry Neumeister at the Houston Chronicle, 19 March 2009.

"Joseph M. Demarest Jr., the head of the New York FBI office, said that Mr. Friehling, betraying his fiduciary duty to investors and his legal obligation to regulators, did little or not testing or verification of the records he was hired to certify as an independent auditor. 'His job was not merely to rubber-stamp statements he didn't verify,' Mr. Demarest said, 'Simply put, Friehling failed to do his job and lied to investors and regulators in saying he did.' ... Some of Mr. Madoff's critics contended that the tiny accounting firm he used was a red flag, given the size of Mr. Madoff's operations", William Rashbaum and Diana Henriques at the NYT, 19 March 2009:

Did not the master say, "He who is without sin among you, let him throw a stone at her first", John 8:7. What did Clarkson's boss Mary Schapiro (MS) do at FINRA? Why wasn't MS indicted? My idea: let Freihling "audit" Citigroup. That should make Barney Frank happy. Does anyone remember about a decade ago, the SEC found hundreds of PWC partners lacked independence. What happened to them? Nothing. What's wrong with a CPA selling his license? I remember a guy working for the OTS in 1986 saying the then Big Eight firms did it all the time.

How are Friehling's actions distinguished from PWC's at AIG?

Hey Demarest, why don't you pick on "somebody" the FBI's size. Like PWC or KPMG?

1 comment:

Anonymous said...

Yes indeed...

I've been wondering myself if the accountants will get a chance to explain where they've been...

Where have they been?

And how does a "Treasury stress test" relate to attested audits? Any equivalence there?

I guess we've lost the bragging rights to "most transparent" capital markets... ha... we're becoming more Nipponish day by day... can you say "keiretsu"?