Scam finder Harry Markopolos took down GE stock more than 11% in one day with a staggering array of charts and numbers, but also some choice words that accuse analysts, rating agencies and GE's management of Enron's behavior.
A day later, GE shares returned almost 10% on Friday after GE chief executive Larry Culp invested $ 2 million on the dip and analysts came to rescue GE, most commonly called Markopolos & # 39; claims inaccurate or based on old news that was already baked into GE's stock price.
Markopolis, known for discovering Bernie Madoff's scheme, accused GE of using false earnings and revenue, hidden debts and losses, illegible accounts, misleading disclosures and other accounting tricks to carry out a $ 38 billion scam. Markopolos also said he wrote his report for a named hedge fund with a short position on the GE stock. The market's reaction on Friday was definitely dismissive.
Markopolo's website, gefraud.com, created GE's logo to resemble Enron's. "GE uses many of the same accounting strikes that Enron did, so much so that we have used to call this & # 39; GEnron & # 39; case," he wrote in his report.
He extended the charges to actuaries, auditors and analysts which he claims overlooked billions of liabilities in GE's long-term insurance business. Here is a selection of his lean:
"GE was able to hide its LTC obligations for a long, long time because the actuaries are about as independent with KPMG, GE's auditor for the last 110 years, and the rating agencies. get paid by GE, so of course they will never question GE's LTC reserves. "
" The analyst environment fell for GE's accounting tricks hook, line and sinker. "
" GE may have survived LTC if it had a Unfortunately, GE's CEO Jeff & # 39; Two-Jet & # 39; Immelt was a CEO who excelled at paying too much to destroy purchases like Alstom and Baker Hughes just in time for the business cycle. "
" Our three last questions are for KPMG, GE's accountants for the last 110 years from 1909: 1) What did you know? 2) When did you know it and 3) Where is your "going concern" meaning? "
" I want to express my sympathy with a million people who rely on GE for either salaries, healthcare or peers Make no mistake, GE's current and former employees are victims here, and GE's lenders, suppliers and customers, all of whom have to cope with the aftermath of an accounting fraud. The only winners here are GE's fat cat leaders who enriched themselves with undeserved bonuses as they drove this proud lighthouse from American business into the ground. "
Markopolos & # 39; rhetoric buzzed a report heavily on complex accounting issues. But it does not appear that Nick Heymann, head of global industrial infrastructure at financial firm William Blair, accused him of throwing a Molotov cocktail.
"You have the stock on sale yesterday for absolutely no basis," Heymann told CNBC on Friday
Markopolos set a high bar for his work and suggested that GE will file for bankruptcy. " Worldcom and Enron lasted about four months, "Markopolos said on CNBC's" Squawk on the Street "on Thursday." We'll see how things are going with GE. "
Still unknown is the hedge fund that paid Markopolos to write its report and when it wants to pay out his short position, but for now, Markopolos got in and he may already be counting his profits.