ABSTRACT
Dirks received a tip from a former employee of Equity Funding Corporation of America (EFCA). The informant claimed that senior managers at EFCA were inflating the company’s assets by recording thousands of fictitious life insurance policies. The insurance policies provided benefits at the time of death, but were poor vehicles for investing. It acquired two other life insurance companies, three mutual funds, a savings and loan, and a cattle ranch. The Equity Funding fraud consisted primarily of creating phony life insurance policies and selling them to other companies. Ron Secrist held a variety of positions within EFCA, eventually ending up as an assistant vice-president at Equity Funding Life. The specific criticisms included Wolfson, Weiner, Ratoff & Lapin partners spending most of their time on marketing and rarely reviewing audit workpapers; audit managers, some of whom were not even CPAs, being allowed to sign audit reports; and auditors not obtaining sufficient evidence to support their conclusions.
