Analyst Nick Heymann dismisses allegations of fraud by Madoff

Madoff's charges warn Harry Markopolos of a $ 38 billion fraud at General Electric is "at best unpleasant" and "at worst very inaccurate," according to Nick Heymann, co-CEO of global industrial infrastructure at finance firm William Blair service company.

"You have the stock on sale yesterday for absolutely no basis. This is why all insiders buy," Heymann told CNBC Friday, one day after GE shares held 11% to $ 8.01 per share in their worst trading season in more than a decade.

GE shares on Friday recoup most of the losses after the troubled conglomerate late Thursday revealed that CEO Larry Culp bought shares for nearly $ 2 million. The purchase was made after Markopolos called the company "a bigger fraud than Enron."

Culp, who became chairman and CEO of GE last year, said that the allegations about Markopolos were false and driven by market manipulation. Leslie Seidman, a board member of the GE Board and Audit Committee, also pushed back the Markopolos report, telling CNBC Thursday that it "does not reflect the GE I know." She added that the report is "full of misleading, inaccurate and inflammatory statements."

Earlier Thursday, billionaire investor Stanely Druckenmiller told CNBC he was adding to his position in GE, which according to SEC filings already amounted to 6.2 million shares. Druckenmiller said he believes in Culpes' turnaround plans.

In a 1[ads1]75-page report, Markopolos accused GE of having issued false accounts to hide the extent of its accounting problems. He told CNBC Thursday that GE is a bankruptcy pending. Markopolos, who is best known for pointing out irregularities with Bernie Madoff's investment strategy the year before the Ponzi scheme was postponed, also said he was conducting research in GE on the occasion of a hedge fund, which he refused to name.

"The two noncash allegations that [Markopolos] currently claim should be reflected in GE's balance sheet, which totals $ 18.2 billion, they are inaccurate under GAAP accounting," Heymann said. The company is already cooperating with the Justice Department and SEC inquiries on accounting practices.

"If this were announced in 2016 or 2017, it would be a very different, real and material withdrawal of the covers," Heymann argued. In January 2018, he pointed out, GE's long-term insurance unit had to raise reserves by $ 15 billion. Markopolos claims that an additional $ 18.5 billion is needed in insurance loss reserves.

Admitting that he is not knowledgeable enough to say whether or not Markopolos votes $ 18.5 billion, Heymann said GE could easily afford that amount if required.

"The immediate liquidity of the company – unlimited cash, revolving lines minus outstanding commercial paper – is over $ 60 billion dollars. It's a check," Heymann said. He added that GE would get $ 21.4 billion this fall from BioPharma sales, and could sell its health unit for around $ 46 billion and the rest of Baker Hughes for $ 5.5 billion. Heymann calculated. "This gives you $ 133 billion in cash in the medium term to meet an alleged $ 18.5 billion claim.

" This is the last Molotov cocktail anyone throws across the street, "Heymann said of the Markopolos report, implied that it is a desperate attempt to displace GE for profit.

In a note to William Blair clients, Heymann wrote: "We do not believe GE's financial statements intentionally represent the company's current financial condition and future potential liabilities. We find it difficult to believe that GE, which has been involved in multiple regulatory reviews of accounting and financial information for over two years, has fraudulently misunderstood its financial reporting. "

Heymann was among a number of analysts defending GE after the Markopolos report on Friday.