Cooperation Deal for Madoff Accountant Expected

Bernard Madoff's longtime auditor, David G. Friehling, is expected to plead guilty next week in a cooperation deal.

Prosecutors reportedly wrote a letter to U.S. District Judge Alvin K. Hellerstein that Friehling was expected to plead guilty at a conference on Tuesday and said that victims of Madoff's multibillion-dollar fraud are being notified.

They said Friehling will enter the plea to revised charges that accuse him of securities fraud, investment adviser fraud, making false filings with the Securities and Exchange Commission (SEC) and obstructing or impeding the administration of the Internal Revenue laws.

Specifically, he will be charged with seven counts: one each of securities fraud, investment adviser fraud, and obstructing tax law administration, and four counts of making false SEC filings. Facing more than 100 years in prison, he is seeking leniency by cooperating with the government.

Friehling was sole proprietor of Friehling & Horowitz, where authorities say he failed to review material sources of firm revenue, examine a bank account through which billions of dollars of client funds flowed, or verify assets, liabilities or purported stock purchases. He was arrested and initially charged in March.

The revised charges reportedly carry a potential prison term of up to 108 years in prison, though substantial cooperation with prosecutors can result in leniency.