Questions surround Madoff auditor

updated 5:34 p.m. ET Dec. 17, 2008

NEW CITY, N.Y. - The office for Bernard Madoff's sole auditor exudes anything but wealth and intrigue: It is next door to a pediatrician in a drab suburban building. The tiny storefront is discreetly labeled "Friehling & Horowitz" on its single glass door.

The people milling around outside are not high-end investors; they are mothers with children, waiting for the doctor's office to open.

But the auditor, a 49-year-old accountant named David Friehling, is now enmeshed in one of Wall Street's biggest scandals and is under criminal investigation in a case that has left people in financial ruin around the world.

The fact that a such a small accounting business was the main auditor for Madoff's multibillion-dollar operation has emerged as one of the most mysterious elements of the case. Experts say it would be preposterous for a tiny firm to audit properly an operation the size of Madoff's.

"What if General Motors had a three-person accounting firm doing its audits?" said Jim Vos, CEO and head of research at the hedge fund consulting firm Aksia LLC in New York City, 30 miles south of this suburb.

Colleague Jake Walthour said, "Most hedge funds, even when they are small, use one of four or five big-name firms. And this wasn't one of them."

Calls to the firm have gone unanswered this week, and the storefront has been locked every day this week. On Wednesday, a notice of a failed UPS delivery was hung on the door.

Friehling's home nearby is on a private road that was blocked by a security car, and no one answered the phone.

Rockland County District Attorney Thomas Zugibe, who is investigating the firm, said this week he did not know where Friehling was and had not had any contact with him. Zugibe's investigators were at the Friehling office Monday morning, knocking fruitlessly at the locked door.

If Friehling's independent audit reports were fraudulent, "You're dealing with some very serious felony offenses under state law," the district attorney said.

"When people make a decision on whether to invest, they do look to see that there was an independent auditor's report and whether or not it was objective and whether or not it basically laid out the strength of the company."

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