Video: Madoff auditor agrees to plead guilty

  1. Closed captioning of: Madoff auditor agrees to plead guilty

    >>> oral-b crossaction brushes.

    >>> this morning, stocks retreating following yesterday's big gains on news the economy is growing faster than analysts predicted. a look at the dow right now. the dow down about 90 points. also today, consumer spending plunged in september by the largest amount in nine months. that was due, in large part, to the end of the government's cash for clunkers program.

    >>> personal incomes remain unchanged as workers contend with growing unemployment numbers and tightening of wages.

    >>> also today, the white house says more than 650,000 jobs have been either saved or created under president obama 's economic stimulus plan. some estimates are putting that number over 1 million . we are joined by ron of nns.

    >> good to see you.

    >> let's get to the jepsy in the numbers. it's the difference between direct jobs and the indirect jobs. can you explain that?

    >> certainly there is always a spin-off effect in various industries when one person gets a job that may support one or two jobs, you know, in the supply chain or in other areas of industry. you know, in manufacturing, for instance, in airplane manufacturing, the trickle down is something like 1 so 10 so for every one job created in aerospace you create ten support jobs to go along with it. i suspect that might be part of it. now, having said that, if, indeed, 1 million jobs are created it will only take 7 1/2 years to get back the jobs that we've lost in this recession. the pace of job growth really has to accelerate whether it's through government stimulus or private means in order to get the labor market fully back on track.

    >> i was going to ask if it's interpret we're getting the most bang for our buck with $800 billion invested in this program eye.

    >> as i said in the past i would have gone about the program differently. i would have spent a trillion dollars refurbishing the electric grid and pay future dividends as opposed to filling potholes which is make work type stuff. a payroll tax with holding holiday for a year or two years would have gotten cash immediately into people's pockets and i think a better use of the money spent so far.

    >> maybe they will ask you next time.

    >> i doubt it.

    >> bernard madoff, getting word his auditor is pleading guilty . he will be the third person in the massive bernard madoff ponzi scheme to plead guilty in this case. he was responsible for certifying all of the financial statements . has he figured out some sort of a deal to work with prosecutors?

    >> that seems to be the case. my colleague here at cnbc has reported that is indeed, the case. this is a cooperating witness now who is exchanging a guilty plea . he had previously pleaded not guilty to a variety of counts but he is now going to plead, i believe, next tuesday, to seven criminal counts, including fraud, filing false statements with the s.e.c. and obstructing the irs. the assumption here, along with mr. de pascualli they are cooperating witnesses in this and hopefully, shed more light on what happened at madoff. now it's said that $21.2 billion was lost in the entire process which is a larger number than we originally thought.

    >> with that time, would come jail sentence. how about the ability to find money to pay restitution to all of those people?

    >> good luck. as we heard from the trust in the case they may have found a couple hundred million and trying to find $21 billion which has been recycled and some lost clearly. the entire $60 billion ponzi scheme that took place over the course of 20 or 30 years, if they were to even get close to a billion dollars, i would assume they would consider themselves lucky in this.

    >> lucky to talk with you as always. thank you so

updated 10/30/2009 12:28:56 PM ET 2009-10-30T16:28:56

Disgraced financier Bernard Madoff's longtime auditor is expected to plead guilty next week in a cooperation deal, federal prosecutors said Friday in a letter to a judge.

Prosecutors wrote in the letter to U.S. District Judge Alvin K. Hellerstein that accountant David Friehling was expected to plead guilty at a conference on Tuesday.

In the letter, signed by Assistant U.S. Attorney Lisa A. Baroni, prosecutors said they wanted to notify the court so that it could provide notice to victims of Madoff's multibillion-dollar fraud that the plea hearing will take place.

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 and obstructing or impeding the administration of the Internal Revenue laws.

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

Friehling's lawyer, Andrew McCutcheon Lankler, said: "We don't have a comment. We've never commented on this case and we're not about to start now."

Friehling, 49, was Madoff's auditor from 1991 to 2008, roughly the amount of time that Madoff admitted he carried out his fraud when he pleaded guilty to fraud charges in March. The 71-year-old Madoff is serving a 150-year sentence at a prison in North Carolina.

Despite the more than $65 billion in private investments that Madoff claimed he oversaw for thousands of investors, Friehling seemed to be a small-time auditor with a tiny office in suburban New City, N.Y. Authorities say he appeared to have rubber stamped Madoff's records.

Authorities say if Friehling had done his job, they would have known years earlier that Madoff was carrying out history's greatest Ponzi scheme by paying money to some investors with the proceeds he received from other investors.

When Madoff revealed his fraud last December in a confession to his sons and later to the FBI, it was discovered that only a few hundred million dollars was left of the more than $170 billion that prosecutors say went through his accounts over the years. Prosecutors say investors originally entrusted Madoff with more than $13 billion and he greatly exaggerated bogus gains.

Friehling remains free on bail. He would be the third person to plead guilty in the case.

Earlier this week, a federal judge in Manhattan continued to deny bail for Frank DiPascali, Madoff's former finance chief who is cooperating after pleading guilty in August to helping Madoff carry out his fraud.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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