GE denies Bernie Madoff whistleblower's accusation of fraudulent accounting
The CEO of General Electric is denying a new report accusing the company of fraudulent accounting and "market manipulation."
“GE will always take any allegation of financial misconduct seriously,” H. Lawrence Culp, Jr., chairman and CEO of GE, told FOX Business in an emailed statement. “But this is market manipulation – pure and simple. Mr. Markopolos’s report contains false statements of fact, and these claims could have been corrected if he had checked them with GE before publishing the report.”
|GE||GENERAL ELECTRIC CO.||106.05||-0.03||-0.03%|
“The fact that he wrote a 170-page paper but never talked to company officials goes to show that he is not interested in accurate financial analysis, but solely in generating downward volatility in GE stock so that he and his undisclosed hedge fund partner can personally profit,” Culp added. After the closing bell, Culp shelled out nearly $2 million for 252,000 shares of GE stock.
Harry Markopolos alleged Thursday in a more than 170-page report posted online that the battered American industrial icon has hidden its problems through fraudulent financial filings with regulators, The Wall Street Journal reports. GE shares tumbled in morning trading.
Markopolos -- who flagged Bernie Madoff's $65 billion Ponzi scheme to authorities two years before it came crashing down, but was ignored -- believes GE’s accounting missteps total $38 billion, or 40 percent of the company’s market value, according to the WSJ. In February, he said he was investigating three multibillion-dollar schemes, one of which was bigger than Madoff's.
Leslie Seidman, GE Director and chair of Audit Committee also told FOX Business in an emailed statement that Markopolos’ accusations aren’t accurate.
“The report contains numerous novel interpretations and downright mistakes about the actual accounting requirements, making his conclusions about GE’s reporting questionable at best,” Seidman said. “In his own words, he stands to personally financially benefit from today’s significant market reaction to his report, and he is selectively front-running widely reported regulatory processes and rigorous investigations without the benefit of any access to GE’s books and records. I urge readers to carefully consider the motivation behind this report as well as the reliability of the analysis underlying his opinions.”
Markopolos did not immediately respond to FOX Business’ request for comment.
The battered company, once an industrial icon, is in the midst of trying to engineer a turnaround after last year shares lost more than half their value amid a slew of problems.
GE's Troubled Timeline:
- June: GE was booted from the Dow Jones Industrial Average and announced a massive restructuring, shifting its focus to aviation, power, and renewables.
- October: CEO John Flannery gets the boot and was replaced by Larry Culp. The company then took a $23 billion goodwill charge for its power business. Culp said he would sell assets to raise cash and pay down debt. The SEC and the Justice Department said they would investigate the writedown.
- End of the year: GE sold a $4 billion stake in the oil-services provider Baker Hughes and announced it would sell a majority stake in the software provider ServiceMax to the private-equity firm Silver Lake. It was able to bring down debt by $21 billion in the fourth quarter.
- January: GE altered its agreement with the rail-transport company Wabtec in order to receive $2.9 billion of cash in exchange for giving up more equity.
- March: Warns it could have a negative free cash flow of up to $2 billion this year.
- June: Reports strong first-quarter results, bolstered by its aviation unit.
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GE shares have gained 24 percent this year.
*The story was updated to reflect Culp's stock purchase.