1. Case 2.6
Bernard L. Madoff Investment and Securities: A Focus on Auditors’ and Accountants’ Legal Liability
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2. Madoff Case Relevant Technical Knowledge
Common Law Liability to 3rd Parties
Ordinary Negligence
Gross Negligence
Fraud

3. Madoff Case Relevant Technical Knowledge
Securities Act of 1933
According to Section 24 of the Securities Act of 1933, there can be criminal penalties imposed on an auditor. In order for an auditor to be subject to criminal penalties, there must be a willful violation by the auditors. That is, they must have “willfully” caused material misstated financial statements to be filed. As a result, this is very difficult to prove.

4. Madoff Case Relevant Technical Knowledge
Securities Exchange Act of 1934
According to Section 32 of the Securities Exchange Act of 1934, there can be criminal penalties imposed on the auditor. In order for the auditor to be subject to criminal penalties, the critical test is whether the auditor “willfully and knowingly” knew about the misstatement in the financial statements.

5. Psychology Literature - How to Best Acquire Knowledge
Feature Repeated Case Experiences with Feedback; and
Teach Technical Concepts within Real-Life Contexts
Consider the following additional cases:
Madoff: The Role of the Securities and Exchange Commission (SEC)
Madoff: Broker-Dealer Fraud
Madoff: Understanding the Client’s Business and Industry

6. Epilogue - Madoff
In March 2009, Bernie Madoff pleaded guilty to 11 different federal felonies, including securities fraud.
On June 29, 2009, Madoff was sentenced to 150 years in prison, the maximum penalty allowed by law.

7. Epilogue - Madoff
On December 11, 2010, Bernie Madoff’s son Mark Madoff committed suicide at the age of 46, 2 years to the day of his father’s arrest in 2008.
In November, 2009, David Friehling, Madoff’s CPA pled guilty with a maximum sentence of 108 years. As of September, 2013, he remains out of jail as he continues to cooperate with the ongoing federal investigation.