New York: General Electric shares plunged Thursday after an accounting expert accused the company of fraud, an allegation the industrial giant strongly denied.
Harry Markopolos, who warned securities regulators about the Bernard Madoff investment scheme years before that firm went under, accused GE of "running a decades long accounting fraud," according to information on gefraud.com, a website set up by Markopolos and his associates. Markopolos told the Wall Street Journal that GE will need to bolster its insurance reserves by USD 18.5 billion in cash and should have booked billions in losses in its oil and gas division.
He is working with an unnamed hedge fund that is betting that GE shares will fall, an investment tactic known as "shorting" a stock, and gave the fund access to his research before it was published. He also will receive a share of trading proceeds, the Journal reported. GE called the claims "meritless," noting the financial incentive to get the share price to fall, and said it stands behind its financial reporting.
"Mr Markopolos openly acknowledges that he is compensated by unnamed hedge funds. Such funds are financially motivated to attempt to generate short selling in a company's stock to create unnecessary volatility," GE said. The report comes as GE struggles to recover from a downturn in its power generation business that has marred results for more than two years. The company reported a second-quarter loss of USD 61 million last month due to USD 744 million in one-time accounting costs connected to its electricity grid business.
By AFP
