Will CPAs Become Madoff's Next Victims?

Dan L. Goldwasser, JD, and John H. Eickemeyer, JD

As the extent of the schemes perpetrated by Bernard L. Madoff continues to unfold, one must ask where it will lead next. Are CPAs in line to be victims of Madoff? This seems like a silly question, because Madoff admitted he operated a Ponzi scheme estimated at $65 billion; pleaded guilty to 11 counts of fraud, money laundering, and perjury; will be sentenced to up to 150 years in jail; and will never be allowed to reenter the securities business. Moreover, CPAs are trained to be skeptical in matters of financial fraud and do not readily fit the profile of a Ponzi scheme victim. The sad fact, however, is that many CPAs are likely to be drawn into the financial black hole created by Madoff's scheme because their clients entrusted their investments to Madoff, either directly or indirectly. In fact, at least three dozen New York accounting firms and another two dozen individual accountants were identified in court filings as having received account statements from Madoff's investment firm.