Madoff Whistleblower Accuses GE of 'Enronesque' Accounting Fraud

By:
Chris Gaetano
Published Date:
Aug 15, 2019
General_Electric_Sign,_Fort_Wayne,_Indiana

Harry Markopolos, who blew the whistle on notorious fraudster Bernie Madoff, said that General Electric has been engaging in accounting fraud that he claims is bigger than Enron, according to CNBC.

He has written a 175-page report that details his accusations, but, in essence, he has accused the company of, for decades, providing only top-line revenues and bottom-line profits for its business units, leaving out cost of goods sold; selling, general and administrative expense (SG&A), research and development (R&D); and corporate overhead allocations. This, he said, serves to obscure billions of dollars in losses connected with its long-term insurance unit—losses that will only grow as policyholders get older—as well as its oil and gas unit. Overall, he said the company's alleged accounting fraud amounts to $38 billion, which is 40 percent of GE's total market capitalization. He believes that the truth is that the company is nearly insolvent and will need billions of dollars to pay claims. 

The report also says that GE changes reporting formats every 2-4 years, and Markopolos believes that this is to prevent analysts from making comparisons across time horizons. 

GE, for its part, said that the claims Markopolos is making are completely baseless, and accused him of working on behalf of short-sellers. Shares of the company's stock fell by more than 13 percent after the report was released.

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