A whistleblower has accused General Electric (GE) of hiding massive losses by engaging in a $38 billion accounting fraud, which is “bigger than Enron”.
In his report this week, investigator Harry Markopolos accused GE of utilising many of the same accounting tricks as Enron did to mislead the investors.
“In fact, GE’s $38 billion 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,” said the report.
GE denied the charge saying the 175-page report contained false statements.
“GE will always take any allegation of financial misconduct seriously. But this is market manipulation - pure and simple,” Lawrence Culp, Chairman and Chief executive Officer of GE said in a statement.
“Mr. Markopolos’ report contains false statements of fact and these claims could have been corrected, if he had checked them with GE before publishing the report,” said the statement. To investigate GE’s fraud, Markopolos team went out and located the eight largest Long-Term Care (LTC) insurance deals that GE is a counterparty to, accounting for approximately 95 per cent or more of GE’s exposure. Either these eight insurance companies filed false statutory financial statements with their regulators or GE’s financial statements are false, alleged the report. The investigator said he got access to these eight insurers’ statutory financial statements filed with the relevant state insurance commissions.
“What they revealed was that GE was hiding massive loss ratios, the highest-ever seen in the LTC insurance industry, along with exponentially increasing dollar losses being absorbed by GE,” said the report.
