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From: wan@gatech.UUCP (Peter N. Wan)
Newsgroups: net.legal
Subject: Re: Insurance companies question
Message-ID: <3781@gatech.UUCP>
Date: Sat, 4-Feb-84 23:33:21 EST
Article-I.D.: gatech.3781
Posted: Sat Feb  4 23:33:21 1984
Date-Received: Wed, 8-Feb-84 07:52:50 EST
References: <488@hou5a.UUCP>, <319@pyuxbb.UUCP>
Organization: School of ICS, Georgia Tech (Atlanta, Georgia)
Lines: 28

I believe that you are referring to the Equity Funding Corporation of
America fraud, which involved over $2 billion.  It was discovered in
1973 in Los Angeles, California.  Insurance was only part of the plan
in this fraud; the companies involved in this were Equity Funding
Corporation CAL, Equity Funding Securities Corporation, and Equity
Funding Life insurance Company.  In addition to insurance, these companies
engaged in financing of operations and selling mutual shares.  A good
writeup of the case is presented in "Crime by Computer" by Donn B. Parker
(published by Charles Scribner's Sons, New York, ISBN 0-684-15576-1).
In the writeup, Parker questions whether this was actually a computer fraud
case; computers don't seem to have been a major factor in this case ("...the
role it [the computer] played was no bigger and more complicated than that
played by the Company's adding machines.")  That is probably why no
programmers were implicated in the case.  In fact, not all of the records
for the company were in the computer to be juggled; records were kept on
microfiche and juggled by hand.  The perpetrators of this fraud inflated
their earnings, borrowed money without listing it as a liability in the
corporate books, and sold fictitious policies to cover existing bogus
policies (the fake policies produced cash-flow problems which eventually
led to their downfall).  Their use of the computer in these operations was
described as being very simple.
-- 
Peter N Wan
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