The U.S. Securities and Exchange Commission has charged the auditors of Bernard Madoff’s broker-dealer firm with securities fraud over allegations that they claimed they conducted legitimate audits, when they had not, the regulator said Wednesday.

In its complaint filed in federal court in Manhattan, the SEC alleges that from 1991 through 2008, certified public accountant David Friehling and his firm, Friehling & Horowitz, CPAs, P.C. (F&H), purported to audit financial statements and disclosures of Bernard L. Madoff Investment Securities LLC, which has been charged with perpetrating a multi-billion dollar Ponzi scheme.

The SEC’s complaint alleges that, among other things, Friehling enabled Madoff’s Ponzi scheme by falsely stating, in annual audit reports, that F&H audited BMIS financial statements, including the requirements to maintain auditor independence and perform audit procedures regarding custody of securities. It alleges that all of these statements were materially false because Friehling and F&H did not perform a meaningful audit of BMIS, and did not perform procedures to confirm that the securities BMIS purportedly held on behalf of its customers even existed.

Instead, the SEC alleges that Friehling merely pretended to conduct minimal audit procedures of certain accounts to make it seem like he was conducting an audit, and then failed to document his purported findings and conclusions as required. The commission also claims that it did not conduct any audit of BMIS internal controls.

None of these allegations have been proven.

The SEC’s complaint seeks financial penalties and a court order requiring both Friehling and F&H to disgorge their ill-gotten gains.

IE