Equity Funding Corporation of America

  • Speaking before state insurance commissioners at the Washington Hilton Hotel or what each called the “Equity Fundings fiasco,” Fred A. Mauck, Illinois' newly named director of insurance, said that because of the “hard work” of state regulators Equity Funding was “not a tragedy but an absurdity.”
    • “Quite frankly,” he said, “it raises a troublesome, but entirely proper, question as to the effectiveness of insurance regulation.” 

1973 0605 - NYT - Insurance Commissioners Plan Surveillance Study - Equity Funding Corporation of America, by Robert J. Cole, Special to The New York Times - [link]

  • The Board of Governors has received numerous enquiries about the Society's position in the Equity Funding situation.
    • The Board has appointed an investigating Committee to keep in touch with developments and with the various authorities conducting investigations.
    • The Committee will report back to the Board when the final results of the various investigations are available.
    • Because of the many complexities in the situation it will likely be some time before these investigations are completed.

--  Thomas P. Bowles, Jr., President of the Society of Actuaries

1973 05 - SOA - The Actuary - 8p

  • One or more situations creating lengthy litigation, such as the recent Equity Funding fiasco, do not tend to serve our efforts in promoting a professionalism needed for public confidence and respect.

--  Daniel J. Kunesh

1974 - SOA - Independence of the Actuary, Society of Actuaries - 150p

  • The Equity Funding Case
    • The Equity Funding Corporation of America was formed in the early 1960s.
    • Its operations focused on a marketing program involving life insurance policies and mutual fund shares in a rather unique investment package.
    • This plan involved the sale by Equity Funding of mutual fund shares which were then pledged as collateral by the buyer for loans to buy term life insurance.
    • The major selling point was that it permitted individuals to invest in mutual funds and receive life insurance as an added benefit.
    • The firm grew rapidly, acquiring mutual funds, insurance companies, and a reputation for shrewd, aggressive management.
    • From a price of $6 a share in 1964, the company's stock soared to a 1969 high of $80 a share.

1976 - Woman C.P.A. - Equity Funding: The Profession Reacts, Flory, Steven M. and Cooper, Kerry, Vol. 38: Iss. 3 , Article 4 - 4p

  • (p42) - The Equity Funding Corporation scandal of the 70's disclosed how an organization that began by defrauding individuals ended up by defrauding reinsurers and lending institutions as well.

1984 - NJCRS - Organizations as Victims and Violators, National Criminal Justice Reference Service - 86p

  • us.sagepub.com/sites/default/files/upm-assets/5224_book_item_5224.pdf
  • 1973 - LC - IN RE: Equity Funding Corporation of America Securities Litigation - 1:73-F-00142
    • Transfer Order - 44p
  • 1973 0404 - NYT - Insurance Fraud Charged by S.E.C. to Equity Funding, By Robert J. Cole - [link]
  • 1973 0407 - NYT - 56,000 Bogus Policies Reported Found at Equity, By Robert J. Cole - [link]
  • 1973 0605 - NYT - Insurance Commissioners Plan Surveillance Study, by Robert J. Cole, Special to The New York Times - [link]
  • 1973 0730 - NYT - Dirks Counts Cost of His Moment of Truth on Equity - [Equity Funding Scandal], By Robert J. Cole - [link-Paywall Free]
    • Raymond L. Dirks, the stock sleuth who triggered the collapse of the Equity Funding Corporation of America four months ago is just beginning to find out how dearly his brief moment of truth has cost him.
    • The New York Stock Ex change has charged Mr. Dirks—who told his clients tale of bogus insurance policies being written at Equity — with fraud, trafficking in rumors and giving his clients inside information.
    • The Securities and Exchange Commission has threatened similar action.
  • wikipedia.org///Equity_Funding
  • 1974 - Book - The Great Wall Street Scandal Complete Numbers, by Raymond L Dirks, Leonard Gross 
  • 1974 0112 - AFL-CIO NEWS - Programmed Theft: Equity Funding Case Bares Dangers of Computer Fraud - p7 - 432
    • Computer fraud came of age with the Equity Funding scandal that took years to detect as company executives programmed more than $2 billion worth of phony insurance policies and $120 million of non-existent assets into the data processing system.
    • Over a decade, at least four major accounting firms audited the mutual fund-insurance company without even uncovering a portion of the fraud, John A. Grimes writes in the AFL-CIO's Federationist magazine
    • Equity Funding was established in 1960 to sell a combination of mutual fund shares and life insurance.
      • Based on a 10-year program, a customer would buy some fund shares every year.
      • Against this, he would borrow to pay the annual premiums on a life insurance policy which he also had purchased.
      • After 10 years, the customer would sell enough shares to pay off the loans.
      • And if the funds did well, Grimes notes, the leftover shares were supposed to provide him 10 years of insurance coverage for nothing.
    • "Wall Street liked the idea, and Equity-Funding became a hot company," Grimes reports.
  • 1975 - ABA - Lessons for Future Counseling of Insurers Involving Ethics, Labilities and Securities Regulation, by Stephen R. Miller and John T. Subak, The Forum (American Bar Association. Section of Insurance, Negligence and Compensation Law), Vol. 10, No. 3 (Spring 1975), p1155-1167 - <JSTOR - WishList> 

    • The massive frauds that are apparently involved in the Equity Funding case have given rise to extensive federal civil litigation, chiefly in California and New York.

    • Anne Oringer v. Equity Funding, Civil Action No. 73-705-MML (C.D. cal., filed Oct. 29, 1973).
    • In re Equity Funding Corporation of America Litigation. M.D.L. Docket 142. 73 CiV. 1374 et al. There are tour separate complaints with the same caption. Each one is on behalf of one or more separate classes.
    • In re Equity Funding Corporation Of America Securities Litigation, CCH FED. SEC. L— REP. 194, 456 (J.P.M.L. 1974).
  • 1975 - LC - Wilcox v. Equity Funding Life Insurance Co.
    • 61 Ill.2d 303, 316, 335 N.E.2d 448, 455
  • 1975 - Book - The Impossible Dream:  The Equity Funding Story - The Fraud of the Century, by Ronald L. Soble and Robert E. Dallos 
  • 1976 - GAO - Lessons We Can Learn From the Equity Funding Scandal, Government Accountability Office - p35-45 - 115p
  • 1976 - GOV (House - Report) - Federal Regulation and Regulatory Reform, John Moss (D-CA)
    • [PDF-804p-GooglePlay]
    • House - Committee on Interstate And Foreign Commerce - Subcommittee on Oversight and Investigations 
    • (p38) - Responding to a question concerning such reconciliation as exemplified by the Gulf Oil Corporation and Equity Funding cases, Dr. Briloff testified as follows:
  • 1977 - Book - The Equity Funding Papers : Anatomy of a Fraud / Lee J. Seidler, Frederick Andrews, Marc J. Epstein.
  • 1978 - Movie - The Billion Dollar Bubble
  • 1980 - - Organization Structure and Organizational Crime, by Edward Gross, in 1980 - Book - White-Collar Crime: Theory and Research, by Gilbert Geis and Ezra Stotland
  • 1981 - AP - How to Lie with Accounting: A Unique Extension of Security Analysis, by Hugh Grove and Ronald Rizzuto, Journal of Financial Education, No. 10 (Fall, 1981), pp. 33-37 (5 pages), Published By: Financial Education Association  - <JSTOR-WishList>