Live 🔴 ►【HD Streaming】- GE tanks after a famous Madoff whistleblower says the company is committing fraud ‘bigger than Enron and .. – Business Insider
AP/Haraz N. Ghanbari
- A whistleblower in the Madoff Ponzi scheme case on Thursday released a report alleging that General Electric’s accounting practices are “Enronesque” and saying the conglomerate is “on the verge of insolvency.”
- The accounting expert Harry Markopolos said he and his team analyzed GE’s accounting and found $38 billion in fraud, calling it “merely the tip of the iceberg.”
- GE sank as much as 14% on Thursday following the report’s release.
- Watch GE trade live here.
General Electric traded as much as 14% lower early Thursday after a Madoff whistleblower, Harry Markopolos, raised concerns about the company’s finances in a 175-page report.
Markopolos alleged that the company had been hiding its financial issues for years through engaging in fraud, making frequent changes to its financial statements’ formatting, and hiding numerous costs. The website hosting the report called GE’s actions “an Enronesque business approach that has left GE on the verge of insolvency.”
“This is my accounting fraud team’s ninth insurance fraud case in the past nine years and it’s the biggest, bigger than Enron and WorldCom combined,” the report said.
It refers in part to the 2001 scandal that led Enron — an American energy company based in Houston — to bankruptcy after it was discovered that executives used accounting loopholes and special-purpose entities to inflate the company’s value.
The group of accountants led by Markopolos claims to have already found $38 billion in fraud, calling the figure “merely the tip of the iceberg.”
The report said that “GE has been running a decades long accounting fraud by only providing top line revenue and bottom line profits for its business units and getting away with leaving out” the cost of goods sold; selling, general and administrative expenses; research and development; and corporate overhead allocations.
Markopolos and his team primarily focused on GE’s long-term-care insurance business. They said that through an investigation into GE’s competitors in this sector, they found that GE was keeping huge losses hidden from investors through false regulatory statements. Markopolos also alleged that the conglomerate’s oil-and-gas unit, Baker Hughes, practiced unethical accounting.
In a statement on Thursday, GE called the allegations “serious and unsubstantiated.” It rebuked Markopolos’ statements on GE’s insurance and Baker Hughes businesses and said the conglomerate held a “strong liquidity position.”
“The claims made by Mr. Markopolos are meritless,” a GE representative told Markets Insider, adding: “GE operates at the highest level of integrity and stands behind its financial reporting. We remain focused on running our businesses every day, following the strategic path we have laid out.”
Markopolos is an accounting expert who made waves after revealing irregularities in Bernie Madoff’s investment strategy, later found to be a Ponzi scheme. Since then, Markopolos has uncovered inconsistencies in the insurance industry and released a book on his work investigating Madoff.
GE opened Thursday at $8.71 per share, up about 15% year-to-date.
The company has 10 “buy” ratings, 10 “hold” ratings, and four “sell” ratings from analysts, with a consensus price target of $11.22, according to Bloomberg data.
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