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Fraud Triangle

In: Computers and Technology

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Fraud triangle model is considerably suitable in analyzing the behavior of the two main individuals-Stanley Goldblum and Fred Levin-in this case. The first condition is pressure, which is the incentive and motivation for fraud commitment (Marhsall, XXX). The temptation of high stock price in order to launch stock for stock basis acquisition and receive bonuses is the main financial pressure for Goldblum and Levin to create fake policies and manipulate their firms’ financial reports. In addition, the greedy and overbearing nature also contributed to the fraud. When Levin found out the employees using computer program to create fake policies, he encouraged the programmers’ behavior instead of stopping them. The second condition of fraud triangle is opportunities. These include the failure of auditing, poor internal control and supervision of board of directors, which all have been explained in the previous paragraph. The last condition, rationalization, also played an important part in this scandal. The managers and the employees all believed what they have done were for the better development for the company and rationalize away their integrity. They all forgot they have the corporate responsibility for the stakeholders and were inconsistent with ethical principles such as honesty and respect for its customers.

As for the economic aspect, American middle class had been suffering in the stagflation economy condition due to poor monetary control. The high inflation rate caused a panic among people, which stimulated insurance purchase and the share price of insurance companies was raised and this made more new policyholders appeared. The reduced business investment due to the reduction in the economy growth rate may contribute to the creation of fictitious financial figures. Especially in the 1970s, the government adopt expansionary fiscal and monetary policies,...

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