More news from the Ponzi-sphere

Just when you thought you could forget about Bernard Madoff, the government announced yesterday that his accountant, David Friehling, has agreed to waive indictment and that the United States Attorney's Office in Manhattan will file a criminal information instead.  Why is this relevant?  Because the waiver of indictment might be an indication that Friehling  is about to become a cooperating witness.  Although it is certainly possible that Friehling is negotiating a straight guilty plea and nothing else, this strikes me as unlikely.  He just watched Madoff (who also entered a guilty plea) receive a sentence of 150 years' imprisonment.  Why would Friehling place himself at risk of what will surely be a substantial prison term, when he could instead enter a cooperation agreement and "earn" himself a minimal sentence of imprisonment?

Under a standard cooperation agreement, in exchange for potential leniency at sentencing, Friehling would provide detailed information about Madoff's scheme and, if necessary, testimony at trial identifying those persons who conspired with or aided Madoff in the execution of the scheme. 

Depending on Friehling's knowledge base, this could be very bad news for some of Madoff's employees (particularly those with knowledge of his asset management business), and for Madoff's feeder funds (whose interlocking relationships with Madoff are illustrated nicely here) if they in fact were aware of Madoff's Ponzi scheme and placed money with Madoff anyway.  Lack of due diligence won't make a criminal case against feeder funds (and it looks like it wouldn't be sufficient to make a civil case either), but if Friehling (or some other cooperator)  provides sufficient evidence that these investment advisors knew Madoff was running a Ponzi scheme, well then, you can expect some well-known criminal defense attorneys to start racking up a lot of billable hours.