Madoff accountant pleads guilty in Ponzi scheme, but will he sing?

Bernard Madoff's former accountant David Friehling pleaded guilty Tuesday, according to a report from the Associated Press. Will he stay silent like Madoff or will he spill his guts to minimize his jail time?

Friehling (pictured) was the longtime auditor for Madoff, and was the first person charged after his boss in the epic Ponzi scheme, but so far, he appears to be keeping silent. Friehling pleaded guilty to charges that are punishable by up to 108 years in prison. It is unclear whether he plans to expose what he knows in a bid to get leniency and a reduction of his jail time.

Frank DiPascali, the former chief financial officer for Bernard Madoff's firm, pleaded guilty in August. He's cooperating with prosecutors and hoping for leniency, but faces a maximum of 125 years on charges of conspiracy, securities fraud, mail fraud, wire fraud, investment adviser fraud, two counts of falsifying the books of a broker dealer, international money laundering, perjury and federal income tax evasion.DiPascali was released on a $2.5 million bond secured by his sister's home after his guilty plea. U.S. Attorney Marc Litt asked the court to schedule DiPascali's sentencing for May of next year. How well he cooperates with the government's ongoing cases will impact the length of his jail term.

Prosecutors could ask for a similar sentencing arrangement for Friehling. Whether they do or not will depend on how cooperative he has been and whether they think he can help with future prosecutions.

Identifying the Guilty, Clawing Back the Money

Both DiPascali and Friehling may have more information on the involvement of other Madoff family members. They may also have key information on some of the large investors and advisers that helped Madoff pull off his Ponzi scheme.

In addition to prosecuting those involved in the Ponzi scheme, the government also wants to recover money for those who've lost. So far, more than $534 million has been paid to 1,368 victims of Madoff through the national fund that insures against failed brokerage firms, according to Irving Picard, the trustee appointed to recover assets for investors who lost money with the convicted swindler.

Picard told reporters in a call Monday that so far, he has identified allowable claims totaling $4.43 billion and is still processing thousands of claims filed by alleged victims, according to The Boston Globe. He also has identified 2,335 investment accounts with net losses of $21.2 billion to Madoff.

Some investors made money. Picard and his staff have found 2,568 investors who withdrew more money from Madoff accounts than they invested. These investors could be vulnerable to what are called clawbacks, which means they could be sued for return of some of the money they made. Picard has recovered $1.4 billion so far and expects to file more lawsuits to force the return of money some investors unknowingly made at the expense of others.

Lita Epstein has written 25 books including Trading for Dummies and Reading Financial Reports for Dummies.
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