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.