March 18, 2009
Criminal Complaint Against Madoff Accountant
The DOJ and SEC are both widening the net of individuals being accused of conduct related to the Madoff matter. The latest complaints (SEC and DOJ) are against his accountant. What is particularly interesting here is the question of what are the responsibilities of an individual who may have access to financial matters of another. Is there an obligation to audit the information provided by a client? And will attorneys be required as "gatekeepers" to question information provided to them by their clients? This issue was one discussed at the recent ABA White Collar Crime Conference here.
The criminal complaint in this case charges securities fraud, investment advisor fraud, and false filings with the SEC. See Criminal Complaint - Download Madoff Accountant Criminal Complaint and SEC Complaint - Download Madoff Accountant SEC Complaint. But I keep thinking about Professor Coffee's piece here, and wondering who is really at fault, and isn't it odd to see the SEC bringing a complaint when their oversight may have fallen short.
(esp)(w/ a hat tip to Peter Henning)
Addendum - This is not an indictment, it is filing of a criminal complaint.
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The accountant was hired to audit the Madoff funds, so in this case, yes there would be an obligation to audit the information provided by the client.
The information in the Wall Street Journal article on Madoff's accountant seems to indicate that this is an anomaly in terms of accounting firm liability. It sure sounded like this guy had no where near the resources necessary to audit a billion dollar enterprise. Obviously this lack of resources resulted in an audit failure and enabled the Madoff fraud.
My accounting firm (with 5 partners) has routinely given up clients that grow too large for us. Most recently we asked a client with $150 million in revenue to transition to a larger firm.
Posted by: Mike S | Mar 18, 2009 5:16:22 PM
A carefully chosen anomaly in my opinion. I sure hope more indictments follow and we can find out which name pols had Mr Madoffs back at the SEC. That's whats really important here.
Posted by: glenn | Mar 18, 2009 7:30:20 PM
Thanks for providing the useful article. The information in the Wall Street Journal article on Madoff's accountant seems to indicate that this is an anomaly in terms of accounting firm liability. It sure sounded like this guy had no where near the resources necessary to audit a billion dollar enterprise. Obviously this lack of resources resulted in an audit failure and enabled the Madoff fraud. That surely would have been known early, so why it happen. Seems a a comedy of erros. The information is something that I will certainly take into account. Look forward to reading other articles.
Posted by: Mark Johnson | Mar 23, 2010 12:48:19 AM