GE shares drop after Madoff whistleblower Harry Markopolos calls it a 'bigger fraud than Enron'

[VMA131Marine]

Yikes!

https://www.cnbc.com/2019/08/15/ge-shares-drop-after-madoff-whistleblower-harry-markopolos-raises-red-flags-on-its-accounting.html

General Electric shares fell after Madoff whistleblower Harry Markopolos targets the conglomerate in a new report, calling it "a bigger fraud than Enron."
The 175-page report claims GE was hiding the depths of its financial problems and would need to significantly raise its insurance reserves. It also points out alleged accounting issues with its oil and gas unit.
"My team has spent the past 7 months analyzing GE's accounting and we believe the $38 Billion in fraud we've come across is merely the tip of the iceberg," Markopolos says in the report.
Markopolos said he has given the report to securities regulators and that certain information he has uncovered was given to law enforcement only, and is not in the public report.

[ck4829]

1. K&R

[waddirum]

2. as if my recession anxiety wasn't already through the roof nt

[superpatriotman]

6. This kind of thing is a potential trigger

The last recession was tied to many problems, but large companies (Shearson, Bear) going belly up mired in impropriety accelerated the decline.

[Hortensis]

11. Yes. Paranoia also. How might Russia be involved?

Pentagon white paper: Russia's Strategic Intentions: "divide their populace, apply economic coercion..."

[mahatmakanejeeves]

3. Madoff whistleblower claims GE is committing fraud 'bigger than Enron and Worldcom combined

Full disclosure: I own shares of GE. My last purchase was in December. The price today is above what I paid for the stock then. I do not have any orders in place to buy or sell shares of GE. I might place an order in the future, but there's not one yet. I don't have so many shares that I'm ruined if the price goes to $0.

Madoff whistleblower claims General Electric is committing fraud ‘bigger than Enron and Worldcom combined’
Ethan Wolff-Mann | Senior Writer, Yahoo Finance • August 15, 2019

The accountant who blew the whistle on Bernie Madoff’s scheme is blowing the whistle again with a new report attacking GE’s (GE) accounting practices. ... In a 175-page report posted online, forensic accountant Harry Markopolos and his fraud team allege that GE is committing $38 billion in accounting fraud.

“{I}t’s the biggest, bigger than Enron and WorldCom combined,” he wrote. “In fact, GE’s $38 Billion in accounting fraud amounts to over 40% of GE’s market capitalization, making it far more serious than either the Enron or WorldCom accounting frauds.” ... Markopolos is calling GE “GEnron,” because the company appears to be “using many of the same accounting tricks that Enron did.”

At the center of his investigation are eight long-term care insurance deals that GE executed. The report alleges that the GE has been hiding “massive loss ratios” and “exponentially increasing dollar losses.”
....

Markopolos warns that GE losses are about to spike. The report says that GE needs $18.5 billion in cash immediately to deal with a wave of impending claims in the insurance unit. Further, it will need another $10.5 billion to address a non-cash charge that will come due by 2021.
....

All of this, the report says, makes it very unlikely that GE can become cash-flow positive by 2021. Markopolos told the WSJ that he is working with an undisclosed hedge fund, which has a short position, betting the stock will fall.
....

Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.

The news two days ago was that the CEO had bought a whole bunch of shares:

GE's Culp makes big stock buy in face of analyst’s pessimism
Greg Ryan -- Law and Mondy Reporter, American City Business Journals • August 13, 2019

General Electric Co. CEO Larry Culp bought $3 million worth of the company’s stock on Monday — the same day that GE’s most notorious skeptic expressed pessimism about its performance going forward.

Culp acquired more than 330,000 GE (NYSE: GE) shares for an average of $9.04 per share, according to a securities filing published early Tuesday morning. The purchase increased Culp’s GE holdings by more than 50 percent.

The filing came after JPMorgan Chase & Co. analyst Stephen Tusa, a well-known GE pessimist, published a research note maintaining his target price for GE stock at $5 per share — well below where shares are now trading. Even though GE reported better-than-expected second-quarter earnings last month, Tusa said the company’s fundamentals continue to look negative from his perspective, according to media reports.

After ending Friday at $9.15 per share, GE’s stock fell as low as $8.95 on Monday before ending the day at $9.05 per share.
....

[democratisphere]

5. The wealthiest and GE executive management sure f'ed up

a great company solely for their own extreme greed. Another great example of the failure of free market capitalism with all of its corruption.

[Mike 03]

4. This is just anecdotal

When my father was alive (he was a bank analyst who late became an investment advisor) he used to study GE's financials and he was always fascinated and concerned by them. He considered investing in GE but never did because something about their reports looked screwy to him. He referred to it as a "black box."

[brush]

13. And Jack Welsh was lionized as a brilliant CEO and showered with a huge golden parachute...

when he retired. That stuff had to be going on when that repug fucker, who, btw, used to regularly bash Obama, was in charge.

[genxlib]

7. Wait! What?

This screamed at me...

"Markopolos told the WSJ that he is working with an undisclosed hedge fund, which has a short position, betting the stock will fall. "

That seems really unethical and on the borderline of stock manipulation for profit.

[VMA131Marine]

8. It would be unethical not to disclose that

But he did.

This is the guy who figured out Madoff was a fraud before anyone else. It doesn't mean he's right in this case, but his claims deserve further scrutiny.

[Hotler]

9. +1 nt

[Mike 03]

10. Bill Ackman did something similar with Herbalife

He felt he'd proved it was a ponzi scheme and went public with his data after taking a very large short position on it. He did disclose it at the time.

[Brother Buzz]

12. Michael Burry did the same thing in the subprime housing market

Interesting enough, he shorted the market after his warnings were ignored.

[DeminPennswoods]

18. Jumped out at me, too

Markopolos told the WSJ that he is working with an undisclosed hedge fund, which has a short position, betting the stock will fall.

The hedge fund has a short position where it makes money if GE's stock falls, and, amazingly, an accountant it hires comes up with a report that causes GE's stock to fall. Wow! What a happy coincidence!

[Yo_Mama_Been_Loggin]

14. Kick

[mahatmakanejeeves]

15. 4:00: Oooof!

https://finance.yahoo.com/quote/GE?p=GE&.tsrc=fin-srch

Almost eight times normal volume:

Volume: 392,256,094
Avg. Volume: 52,171,384

Other than that, it looks like rain. I might try to get in some shopping, or I might not. Either way, I'll go home eventually, have something to eat, and watch some TV. Just another day.

Remember the "d's": dollar-cost averaging and diversification.

Stocks will fluctuate.

[Trenzalore]

16. When I was in business school GE was the prime job

That was 20 years ago and I understand that is no longer the case. After what happened to my father at Lucent in the late 1990s nothing would surprise me.

[mahatmakanejeeves]

17. General Electric CEO buys $2 million in stock after fraud allegations from Madoff whistleblower

This is not an endorsement; just a data point.

Business
General Electric CEO buys $2 million in stock after fraud allegations from Madoff whistleblower
Lawrence Culp’s purchase was meant to send a message to investors: Do not panic

By Jonnelle Marte
August 16 at 10:00 AM

General Electric’s chief executive snapped up $2 million in company stock after a highly critical report of the company’s financial health caused the share price’s most dramatic drop in 11 years.

Lawrence Culp, who took the helm at GE last fall, bought 252,000 shares at $7.93 each, according to a U.S. Securities and Exchange Commission filing. Shares had plunged more than 11 percent Thursday after Harry Markopolos, the whistleblower who sounded the alarm on Bernie Madoff, released a report alleging that GE was using accounting tricks to mask its financial problems.

The 175-page document outlined what Markopolos claims are accounting irregularities that add up to $38 billion. After reviewing more than a decade of financial statements, researchers concluded that the company is understating its insurance liabilities and that it does not have enough cash.

Markopolos said on CNBC that he looked into GE at the request of a “mid-sized U.S.-based hedge fund,” but did not identify the firm. He said he will receive a “decent percentage” of any proceeds the hedge fund earns from shorting GE stock.
....

Jonnelle Marte is a reporter covering personal finance. She was previously a writer for MarketWatch and the Wall Street Journal. Follow https://twitter.com/jonnelle