Business

General Electric a bigger fraud than Enron, alleges report

ANI | August 16, 2019 01:02 PM
GE shares fell by 11 per cent to 8.01 dollars on Thursday

New York [USA], Aug 16 (ANI): A whistleblower has accused General Electric (GE) of using accounting tricks to mask the extent of its financial problems and called it a bigger fraud than Enron.

Harry Markopolos, who is famous for blowing the whistle on Bernie Madoff's Ponzi scheme in 2008, said in a report released on Thursday (local time) that GE was hiding nearly 40 billion dollars of losses in its insurance business. He said this is the largest case of accounting fraud he and his team have investigated.

"In fact, GE's 38 billion dollars 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," Markopolos wrote in the report, referring to the scandals that eventually helped bankrupt energy giant Enron in 2001 and long-distance telco WorldCom in 2002.

GE shares fell 11 per cent, to 8.01 dollars on Thursday. The stock traded near 12 dollars a year ago and 30 dollars at the start of 2017.

Markopolos made several comparisons to Enron in his report and also on a new website with the URL www.gefraud.com. He accused GE of using what he dubbed the GEnron' playbook.

Researchers who reviewed GE's financial statements from 2002 to 2018 alleged that the company does not have enough cash to cover the claims on long-term care policies, which help people pay for nursing homes and assisted the living.

The report says GE reported earnings when policyholders were young and not filing insurance claims, but then miscalculated how much it would have to spend to issue those benefits. GE does not have adequate reserves to cover the liabilities on its long-term care business, even though it boosted those reserves by 15 billion dollars last year, according to the research.

GE strongly denied Markopolos' allegations.

"The claims made by Markopolos are meritless," GE said in a statement adding that it "has never met, spoken to or had contact with Markopolos, and we are extremely disappointed that an individual with no direct knowledge of GE would choose to make such serious and unsubstantiated claims."

Co-founded by Thomas Edison in the late 19th century, GE evolved into an iconic American company with a track record of innovation. Over time, its reach expanded across a range of industries, with products including home appliances, medical devices and the airplanes.

(ANI)

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