Markopolos on GE: 'I think I have a few smoking guns’

Finance Writer
Yahoo Finance

Well-known whistleblower Harry Markopolos says that he has “a few smoking guns” on General Electric (GE).

The forensic accountant — who previously uncovered Bernie Madoff’s Ponzi scheme — released a 170-page report today detailing why he believed GE engaged in accounting fraud that was “bigger than Enron and WorldCom combined.”

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“There are things that I have held back just for law enforcement because I don’t want to tip our hand,” Markopolos said in an interview on Yahoo Finance’s The Final Round.

“Do you have a smoking gun?” asked Yahoo Finance’s Adam Shapiro. “I think I have a few smoking guns, yes,” responded Markopolos.

Markopolos later added: “Only GE’s accountants know where the skeletons are buried. We dug up several, $38 billion worth. There’s probably a lot more.”

Harry Markopolos testifies during a House Financial Services Committee hearing on Capitol Hill February 4, 2009 in Washington, DC. (Photo: Mark Wilson/Getty Images)
Harry Markopolos testifies during a House Financial Services Committee hearing on Capitol Hill February 4, 2009 in Washington, DC. (Photo: Mark Wilson/Getty Images)

‘There are a lot more cockroaches’

Markopolos’ massive report alleged that his team had found massive accounting fraud at the company — which once was a global empire — and said that it could soon file for Chapter 11 bankruptcy.

He explained in his report that the two biggest clues came from the $53.5 billion in negative surprises from 2017 and 2018, and the fact that GE brushed those negative events off in media interviews.

“When you see that many large dollar adjustments in such a short time frame that’s not house-cleaning, it’s a red flag that the prior years’ financial statements were false, internal controls are weak to non-existent, and there are a lot more cockroaches in the GE earnings’ kitchen that you haven’t seen yet,” Markopolos stated.

Markopolos has also dubbed the firm“GEnron,” as he believed the company was “using many of the same accounting tricks that Enron did.”

Former CEO of General Electric, Jack Welch, speaks during the World Business Forum in New York October 5, 2010. (Photo: REUTERS/Lucas Jackson)
Former CEO of General Electric, Jack Welch, speaks during the World Business Forum in New York October 5, 2010. (Photo: REUTERS/Lucas Jackson)

‘GE stands behinds its financials’

GE responded to Markopolos’ findings in an email to Yahoo Finance.

“We have never met, spoken to or had contact with this person. While we can’t comment on the detailed content of a report that we haven’t seen, the allegations we have heard are entirely false and misleading,” the GE spokesperson stated.” It’s widely known and the Wall Street Journal has previously reported that he works for and is compensated by unnamed hedge funds. Such funds are usually financially motivated to try to generate short selling in a company’s stock to create unnecessary volatility.”

The spokesperson added: “GE stands behind its financials.”

Aarthi is a writer for Yahoo Finance. Follow her on Twitter @aarthiswami.

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