Submitted via IRC for SoyCow2718
GE stock has worst day in 11 years after Madoff whistleblower calls it a bigger fraud than Enron
General Electric shares plunged more than 11% Thursday after Harry Markopolos, who is famous for blowing the whistle on Bernie Madoff's Ponzi scheme in 2008, accused GE of orchestrating a massive fraud.
GE CEO Larry Culp on Thursday bought 252,200 shares at $7.93 per share, a purchase worth almost $2 million, according to an SEC filing. The buy helped bump GE's share price around 2% in after-hours trading. Culp's ownership of GE stock nearly doubled this week after an earlier purchase Tuesday. GE Board Director Leslie Seidman called the fraud allegations "baseless" and "inflammatory" in an interview on CNBC's "Closing Bell" Thursday evening. She said Markopolos' claims do not "reflect the GE I know." Seidman chairs of the board's audit committee.
Markopolos said in a report released Thursday that GE was hiding nearly $40 billion of losses in its insurance business. He said this is the largest case of accounting fraud he and his team have investigated. "In fact, GE's $38 billion in accounting fraud amounts to over 40% of GE's market capitalization, making it far more serious than either the Enron or WorldCom accounting frauds," Markopolos wrote in the report, referring to the scandals that eventually helped bankrupt energy giant Enron in 2001 and long-distance telco WorldCom in 2002. GE strongly denied Markopolos' allegations.
(Score: 0, Interesting) by Anonymous Coward on Saturday August 17 2019, @12:15AM (14 children)
Where does all this alleged information of wrongdoing come from? How can he be privy to inside information? GE has had new management since like 2 years ago, accounting fraud tends to develop where situations have been stable. Reports say that Markopoulos is cooperating with a group of short sellers and will get a piece of the action, is that legal to talk down the value of a company to profit from the fall?
All this hyperbole from Markopoulos and the unclear circumstances. I for one picked up some of the discounted shares yesterday.
(Score: 0) by Anonymous Coward on Saturday August 17 2019, @12:23AM (2 children)
Agreed, the "optics" look bad if the "research into GE finances" was funded by a hedge fund. From what little I know, there are big time SEC rules against this kind of pump and dump behavior.
(Score: 1) by khallow on Saturday August 17 2019, @04:13AM
Only if they break the rules. Merely profiting handsomely from the release of well presented public information doesn't count.
(Score: 2) by shortscreen on Sunday August 18 2019, @12:57AM
This sounds like the opposite of a pump and dump. A slag and snag perhaps.
(Score: 5, Informative) by Coward, Anonymous on Saturday August 17 2019, @12:29AM (1 child)
It says right in the report:
Yes, this is an attack by short sellers on GE. But they seem to have a firm basis for their statements.
(Score: 0) by Anonymous Coward on Sunday August 18 2019, @01:19AM
"Long-Term Care (LTC) insurance"
Doesn't that pretty much mean that when GE tanks, they are literally going to be unplugging patients? I mean Madoff's fraud indirectly killed a lot of people (including his own son, if I remember right). But it sounds like if Markapolis is right, this might actually end up being a lot closer to actual manslaughter.
Maybe one or two will face the pokey. Hundreds, maybe thousands of deaths, dozens of conspirators, and maybe one or two will go to club fed.
SSDD.
(Score: 4, Insightful) by http on Saturday August 17 2019, @01:48AM (8 children)
From the report:
It all started because GE's numbers looked especially odd and its trading price potentially over-valued; of course short-sellers are going to be most interested in such situations. Smart people showing prudence, who would have thought?
I browse at -1 when I have mod points. It's unsettling.
(Score: 1, Insightful) by Anonymous Coward on Saturday August 17 2019, @03:06AM (7 children)
And supposedly this small group of smart people have found something that vast multitudes of smart people haven't found, even after GE has taken a nose dive the last few years and every economy journalist and shyster lawyer would have been licking their chops for a chance to take GE down further?
(Score: 0) by Anonymous Coward on Saturday August 17 2019, @04:10AM (5 children)
There are many companies out there. A lot of business being done. Someone found the time to check GE's droppings, and they want to share what they found.
(Score: -1, Troll) by Anonymous Coward on Saturday August 17 2019, @04:27AM (4 children)
It 'sounds' credible. Right up to the point where he shorted it.
So it could be 100% right. But then he turned it into a pump and dump lookalike. Why....
(Score: 0) by Anonymous Coward on Saturday August 17 2019, @07:47AM (3 children)
Why not?
If it is true, and they spent the time/money investigating, why shouldn't they profit ?
If it turns out to be false, then they will probably will be prosecuted.
(Score: 0) by Anonymous Coward on Saturday August 17 2019, @02:36PM (2 children)
If true. But what if this group doesn't have the full picture? Additional credit facilities or rereinsurance contracts perhaps.
Is Markopolos the group's face man to capitalize on his notability from 2008?
The safest thing to do would have been to approach the SEC and let them do an investigation that, if their information was complete and correct, would have lowered the market price. Instead, they went to the unsophisticated investor with cute graphics of GE-Enron logos for a quick buck.
(Score: 0) by Anonymous Coward on Saturday August 17 2019, @02:58PM
I just looked him up on Wikipedia:
Could just be a windbag (who's a little bit nuts).
(Score: 0) by Anonymous Coward on Saturday August 17 2019, @05:16PM
That is my point exactly! He *wants* them to blow up. He is actively trying to do so. It makes it look like a pump/dump. It could still be 100% right. But the way he is doing it is quite unorthodox. The correct way is like you point out. SEC->buy shorts. Keep quite.
If he is 100% wrong though and is pump/dump this big. He is going to get his shit pushed in by the org he should have went to...
(Score: 2, Informative) by Anonymous Coward on Saturday August 17 2019, @11:13AM
I have no idea whether this is true or not. But the people questioning the finances of Enron, MCI Worldcom, Madoff, etc... were laughed at as lunatics right until they day they were proven true.
If the market was almost always smart, guided by smart people, then 2000-2001 and 2007-2009 wouldn't have happened.
(Score: 3, Funny) by Coward, Anonymous on Saturday August 17 2019, @12:22AM
Bigger accounting fraud right here in Boston, Massachusetts than Enron could pull off in the heart of Texas. It makes my New England heart proud.
(Score: 0) by Anonymous Coward on Saturday August 17 2019, @01:06PM (1 child)
no idea what's going on with GE.
however somethings wrong with this sentence:
"The buy helped bump GE's share price around 2% in after-hours trading."
"after-hours" implies trades don't go on continuesly?
if market is closed, then there's no trading? if there's no trading, how does something change its price?
or should we just ignore the word "after-hours" and assume it's a "fancy ribbon word" with no meaning and acctually GE stocks are traded 24/7?
or is "after-hours" something real, stocks stop trading and no price changes can happen, in which case why just ignore the 200 godzbillion % price increase ... after-hours?
ooooorrrr is "after-hours" trading something for ... the select few?
(Score: 0) by Anonymous Coward on Saturday August 17 2019, @02:19PM
After hours the stock market is closed. Of course two people could still come together, but the market makers and other professionals have already left for home. You may not get the best price, nor the quantity you want, ie liquidity is lower than usual. That's why they use the qualifier "after hours".
(Score: 0) by Anonymous Coward on Saturday August 17 2019, @01:13PM
Just mod Harry Markopolos as -1 Troll, that should work.
(Score: 0) by Anonymous Coward on Saturday August 17 2019, @03:13PM
SEC employees all suddenly win "Free light bulbs for life" lottery.
The question I have is: How may times will the guy have to make the claim before the SEC notices? He published a number of times on Maddoff before the SEC even got out of bed. And even then, only a few out of the dozens that were in on the scam actually went to the pokey.
(Score: 1, Interesting) by Anonymous Coward on Saturday August 17 2019, @05:12PM
If a fraud causes losses over a certain amount or to "the little guy" over a certain amount, and someone is found guilty of said fraud, the gov should fine them and also declare that no assaults or murder of said fraudster will be investigated or prosecuted. Let the people tear them limb from limb. I'll bet these professional scumbags would quit pulling this shit after the first CEO was tarred and feathered and burned at the stake on a live stream.