Bernard Madoff’s accountant will plead guilty next week to criminal charges linked to his role in the $65 billion (£40 billion) Ponzi scheme orchestrated by the convicted fraudster.

David Friehling, who is accused of rubber-stamping Madoff’s accounts for 17 years, worked out of a suburban New York firm so small that experts say it could never have properly audited the swindler’s huge asset management business.

Madoff was sentenced in June to 150 years in prison after admitting the fraud – the largest in history. Since his confession and guilty plea, prosecutors have been trying to piece together how the Ponzi scheme – which takes money from new investors to pay existing ones – grew so large and ran for so long.

When prosecutors filed criminal charges against Mr Friehling in March, contending he did not conduct proper audits, he initially pleaded not guilty. But today (Friday) prosecutors indicated that this had changed.

”The government anticipates that, at the pretrial conference scheduled for Nov. 3, 2009 ... David G. Friehling, the defendant, will plead guilty pursuant to a cooperation agreement with the Government,'' prosecutors said in a letter to the judge handling the case in Manhattan federal court.

Mr Friehling's lawyer, Andrew Lankler, declined to comment.

Mr Friehling is one of only three people, including Madoff and his right hand man Frank DiPascali, who have been criminally charged in relation to the case so far.

Mr Di Pascali, the former finance chief at Madoff Securities, who worked at the firm for more than 33 years, entered his own guilty plea in August. He is due for sentencing in the spring and remains in prison while a judge considers his second application for bail.

In a separate development this week, Irving Picard, the court-appointed trustee overseeing claims by Madoff's victims has raised his tally of their cash losses from $13 to $21.2 billion.

The figure represents the total of the cash lost by the approximately 2,300 accounts held by investors who put more into the scheme than they withdrew over time. It contrasts with the headline figure of $65 billion, which includes fictitious profits added to customer accounts by Madoff over the years.

Mr Picard said he had approved $4.4 billion in claims, and located about $1.5 billion in assets that will help cover a portion of them.

At the same time, the Securities Investors Protection Corporation (SIPC), the industry-financed fund working with Mr Picard to help compensate Madoff investors, said it had distributed $534 million to more than 1,550 victims.

The value of the SIPC payouts, which are limited by law to $500,000 per person, exceeded the combined amount from 321 previous brokerage liquidations since 1970.

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