GE shares plunge as much as 15% after Madoff whistleblower claimed the company is a ‘bigger fraud than Enron’ and a bankruptcy waiting to happen
Fraud investigator Harry Markopolos published bombshell report on Thursday
Accused GE of hiding $38.1 billion in potential losses and concealing debt
Markopolos previously blew the whistle on Bernard Madoff’s Ponzi scheme
Now he is working for an undisclosed hedge fund that bet against GE stock
Shares in the company plunged as much as 15% after the report was released
GE blasts the investigator’s allegations as ‘meritless’ and ‘unsubstantiated’
KEITH GRIFFITH
DAILYMAIL.COM
15 August 2019
General Electric shares fell as much as 15% on Thursday after fraud investigator Harry Markopolos, who blew the whistle on Bernard Madoff’s Ponzi scheme, said GE was concealing deep financial problems.
In a 175-page report, Markopolos accused GE of hiding $38.1 billion in potential losses and asserted that the company’s cash situation was far worse than it had disclosed.
‘GE’s true debt to equity ratio is 17:1, not 3:1, which will undermine its credit status,’ Markopolos said in the report, which was commissioned by an undisclosed hedge fund that has taken short positions on GE stock.
The report says GE is insolvent and asserts that its industrial businesses have a working capital deficit of $20 billion.
The plunge in share prices wiped more than $10 billion off of GE’s market capitalization in a matter of hours.
In a statement to DailyMail.com, GE blasted the allegations as ‘meritless,’ adding: ‘The company has never met, spoken to or had contact with Mr. Markopolos, and we are extremely disappointed that an individual with no direct knowledge of GE would choose to make such serious and unsubstantiated claims.’
The report echoes the assertions of some of Wall Street’s more skeptical analysts, who have long raised alarms about GE’s low cash flow, frequent accounting charges and writedowns and what they describe as opaque financial reports.
The report adds that ‘GE’s $38 billion in accounting fraud amounts to over 40% of GE’s market capitalization, making it far more serious than either the Enron or WorldCom accounting frauds.’
In a statement GE said: ‘We remain focused on running our business every day and … will not be distracted by this type of meritless, misguided and self-serving speculation.’
GE said it ‘stands behind its financials’ and operates to the ‘highest-level of integrity’ in its financial reporting.
GE said Markopolos was known to work for unnamed hedge funds that typically benefit from short selling a company’s stock.
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