Madoff accountant sentenced to home detention

AP News
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Posted: May 28, 2015 4:10 PM

NEW YORK (AP) — A former accountant who certified fake financial records hiding Bernard Madoff's epic Ponzi scheme was sentenced on Thursday to one year of home confinement, becoming the latest defendant to avoid prison by cooperating in the case.

David Friehling had agreed to cooperate almost immediately after the financial fraud — one of the largest in U.S. history — was exposed in 2008. Last year, he testified for several days against five of the firm's insiders before a jury found them guilty of participating in the scheme.

"His cooperation has been extraordinary," prosecutor Randall Jackson told U.S. District Judge Laura Taylor Swain in federal court in Manhattan.

Before hearing his sentence, Friehling apologized to investors whose life savings were wiped out by the fraud. Those victims included his father and other members of his family.

"I will regret for the rest of my life the role I played in this devastating crime," he said.

Friehling, 55, pleaded guilty to fraud in 2009. He claimed he didn't know about the Ponzi scheme but admitted he never conducted an independent audit of Madoff's firm as accounting rules required and knowingly used false records to reduce Madoff's tax bills for 17 years, starting in 1991.

The day Madoff was arrested, his customers believed their accounts contained nearly $65 billion. But a bankruptcy trustee found they actually lost about $17 billion.

On Thursday, Friehling cited evidence that Madoff's finance chief, Frank DiPascali, once asked his boss in a conversation about Friehling, "Have you been paying him off or is he just dumb?" Madoff responded that the accountant was dumb.

Friehling said hearing that was painful. But, he added, "I'd rather be regarded as dumb than crooked."

Swain sentenced another cooperator, Craig Kugel, on Thursday to two years of supervised release. Kugel, who worked in human resources at Madoff's firm, pleaded guilty in 2010 to tax fraud charges accusing him of authorizing salaries and benefits for people who weren't employees.

On Wednesday, the judge sentenced Kugel's father, David Kugel, to 10 months of home confinement. He pleaded guilty in 2011 and agreed to testify about how he helped Madoff create fake, backdated trading records beginning in the early 1970s.

The Madoff employees convicted at trial received sentences ranging from 2½ to 10 years behind bars.

Madoff, 77, is serving a 150-year prison sentence.