Other investors on the basis of inside information
A little over a month, the holdings of America Corp. has been a rapid growth of financial services conglomerate in color with a record sale of insurance. Last week, and its greatest Equity, a subsidiary of insurance has been the centre of one of the biggest business scandals in history, a background image distasteful, false accounting charges, a large number of false insurance policies and the dumping of large blocks soon - to - the value of storage companies and other investors on the basis of privileged information.
How to ask auditors of companies view recordings, spreading revelations of fraud losses are up to several million. Although dozens of major banks, insurance and brokerage firms are involved, the biggest losers are likely to be the owner of the company, shares of 8000000 shares, which valued at $ 80 a , but it is now worth some brokers Tour dark zero. At the end of the week, after three top-equity managers, whose chairman Stanley Gold Blum, has been withdrawn, the company began bankruptcy procedures.
The storm began to break Equity some four weeks ago in a manner calculated, just to calm the expansion plan services of investors are disappointed at the Bourse (see previous story). A former employee, Ronald H. Secrist decided to blow the whistle. For some reason, Secrist told his story, the New York Stock Exchange and the Securities and Exchange Commission, but Raymond L. Dirks, an insurance with specialists from Wall Street, company research Delafield Childs. Dirks first three warned its customers a great company Equity Holding shares. While Dirks Equity face associated costs. Then, he received nearly refer the matter to the SEC. The rumors about the firm’s difficulties began the race by the financial community, and major shareholders as Bankers Trust, Chemical Bank and Sears are the Pension Fund began to unload. In eight days, the price of shares was forced from $ 25 to $ 14 or so. Because of the strong distribution, trade in shares was halted by the New York Stock Exchange on March 27. Meanwhile, the SEC, in collaboration with the regulatory authorities Insurance California, Illinois and other countries, a movement finally take up this matter.
The activities, they discovered an astonishing boldness Business FlimFlam. In dire need of cash benefits because of investment certificates Hängebrüsten distribution, officials of the company drafted in 1969, which seemed a surefire way to get capital easing their balance sheets and their stocks attractive. They began to invent fictitious insurance insurance, based on books and sale of false policy towards other companies, covering the activities of reinsurance. Under this scheme, the reinsurers pay the company sells, that the policy of $ 1.80 for each $ 1 in premiums, it is the first year. The buyer therefore wishes to gain a following that most premium-quality, while the seller besides, for politics. For the money for the payment of insurance premiums for the ghost sell shares, had large quantities of fictitious insurance policies per year.
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