GE’s financials targeted in report by Madoff whistleblower
Company calls allegations ‘false and misleading’ as its shares fall 5%
General Electric shares declined on Thursday by the release of a report by Harry Markopolos, who blew that whistle on Bernard Madoff’s massive Ponzi scheme, that alleged the company is masking its financial problems.
Shares fell 5 per cent in pre-market trade to $8.61 following the report, in which Mr Markopolos alleges that “GE’s $38bn in accounting fraud amounts to over 40 per cent of GE’s market capitalisation, making it far more serious than either the Enron or WorldCom accounting frauds”.
He argued that the conglomerate has understated its liabilities in its insurance business, said its cash situation is worse than disclosed in its filings and that it has not properly accounted for its acquisition of a stake in oilfield services provider Baker Hughes, which was completed in 2017. GE began to sell down that stake in 2018.
“While we can’t comment on the detailed content of a report that we haven’t seen, the allegations we have heard are entirely false and misleading,” GE said in a statement to the FT. “GE stands behind its financials. We operate to the highest level of integrity in our financial reporting and we have clearly laid out our financial obligations in great detail.”
The company added: “It’s widely known and the WSJ has previously reported that he works for and is compensated by unnamed hedge funds. Such funds are usually financially motivated to try to generate short selling in a company’s stock to create unnecessary volatility.”
The allegations were first reported by the WSJ. GE shares were up 24 per cent year-to-date as of Wednesday’s close.