An accounting expert who raised red flags about Bernie Madoff ’s Ponzi scheme has a new target: General Electric Co. GE -3.42%
Harry Markopolos releases report on GE’s accounting, claiming its cash situation is far worse than disclosed and GE needs to boost insurance reserves.
Markopolos alleges the struggling conglomerate has masked the depths of its problems, resulting in inaccurate and fraudulent financial filings with regulators.
Markopolos said his group found GE’s insurance unit will need to bolster its reserves by $18.5 billion in cash and faulted the way the company is accounting for its oil-and-gas business. All told, he said, the accounting problems amount to $38 billion, or 40% of the conglomerate’s market value.
The group also is sharing its findings with securities regulators, hoping to collect a cash reward as part of a whistleblower program.
GE said it hasn’t been contacted by Mr. Markopolos and that the group’s report was produced to help short sellers profit by creating volatility in GE’s shares.
The Boston-based investor-turned-investigator warned the Securities and Exchange Commission about the Madoff investment scheme years before it became public, but was ignored.
GE is already under investigation by the SEC and Justice Department for potential accounting issues that have come to light in the past two years related to its insurance holdings and problems in its power division.
The Markopolos group said it plans to present its report to the SEC and to meet with federal prosecutors and investigators about its findings.Shares are close to $9, where they have spent much of 2019. The share price was above $30 at the beginning of 2017 and near $7 at the end of 2018.
The Markopolos group includes John McPherson, co-founder of MMS Advisors, forensic accountants specializing in the insurance industry. The group worked for seven months to analyze GE’s accounting.
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