GE Shares Sink the Most in 11 Years After Whistleblower Reveals Shocking Accusation

Shares of General Electric collapsed on Thursday to see the biggest loss the stock has seen in 11 years after Madoff whistleblower Harry Markopolos called the company “a bigger fraud than Enron.”

Markopolos has accused the company of issuing fraudulent financial statements to hide the extent of its problems. The history of accounting fraud dates back to as early as 1995, when the company was run by Jack Welch.

In a 175-page report, Markopolos claimed that GE was hiding the depths of its financial problems and would need to significantly raise its insurance reserves. The financial investigator wrote, “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.”

The report has already been given to securities regulators and certain information not in the public report was also given to law enforcement only.

“It’s going to make this company probably file for bankruptcy,” Markopolos said on CNBC’s “Squawk on the Street. ” “WorldCom and Enron lasted about four months. … We’ll see how GE does.”

GE’s CEO issued a statement and said the allegations were false.

“GE will always take any allegation of financial misconduct seriously. But this is market manipulation – pure and simple,” said Lawrence Culp, chairman and CEO of GE.

He added, “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.”

According to Culp, Markopolos had never talked to the company’s officials before publishing the report which “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.”
Shares of GE closed the day at $8.01 a share.

Culp purchaed 252,200 shares for about $7.93 each after the report was published.

Disclaimer: We have no position in General Electric Company (NYSE: GE) and have not been compensated for this article.