Madoff 'n' Jeff

Primary sources exposed and explained.
Dec. 17 2008 5:34 PM

Madoff 'n' Jeff

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Bernie Madoff, a much-respected Wall Street investment adviser and former NASDAQ chairman, was arrested last week after he confessed to the Federal Bureau of Investigation that he'd committed securities fraud. Madoff told the FBI that his 50-year-old company, Bernard L. Madoff Investment Securities LLC, had been running a "giant Ponzi scheme" for years and that there was "no innocent explanation." The company has been placed in receivership.

Investigators for the Securities and Exchange Commission, the FBI, and the Securities Investor Protection Corporation will surely have a few questions for the company's accountant, Friehling & Horowitz—a small tax-preparation firm located in a shopping center in tiny  New City, N.Y.—about the $1.3 billion in assets that David Friehling signed off on in December 2006. At least one hedge-fund adviser,  Aksia LLC, had last year warned clients that Friehling & Horowitz, which had only "three employees, of [whom] one was 78 years old and living in Florida [and] one was a secretary," seemed a peculiar choice given "the scope of Madoff's activities."

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The two companies were, indeed, an odd match. On the Madoff Investment Securities  Web site (Pages 2-4), which has now been removed and replaced with a trustee notice, the Wall Street powerhouse boasted of being "one of the first U.S. members of the London Stock exchange." Friehling led a more provincial life, delightedly relating last year in the "Trusted Professional,"a newsletter for certified public accountants, that while touring Europe last year he and his wife foiled potential pickpockets by relying on a prepaid debit card rather than cash (below). "Although the seascape and the historical sites differ dramatically from those in the U.S.," Friehling wrote, "we are all operating in a 21st-century economy. When exiting ruins that are over 2,500 years old, there you find it: the bank ATM!"

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