• Exposer of Madoff Ponzi scheme claims General Electric engaged in bigger fraud than Enron

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      Patrick Lavery

      Combustion Industry News Editor

Financial investigator Harry Markopolos and his ‘Fraud Investigators’ team have launched claims that General Electric is engaged in an accounting fraud bigger than that of Enron. The team says it has been investigating GE for more than a year, and that the company “has been running a decades long accounting fraud by only providing top line revenue and bottom line profits for its business units and getting away with leaving out cost of goods sold, SG&A, R&D and corporate overhead allocations.” The explosive claims, which Mr Markopolos says amounts to a US$38 billion (€34.2 billion) fraud that will lead to GE’s bankruptcy, sent GE’s share price into a fall of almost 15% after the release of the Fraud Investigators’ report, though a slight recovery followed. In response, GE released a statement saying that it “stands behind its financials” which are conducted with the “highest level of integrity”, and that the Fraud Investigators’ claims were “meritless, misguided and self-serving speculation”. Larry Culp, GE’s chief executive, said that “The fact that [Markopolos] wrote a 170-page paper but never talked to company officials goes to show that he is not interested in accurate financial analysis but solely in generating downward volatility in GE stock so that he and his undisclosed hedge fund partner can personally profit.” Mr Markopolos (partly responsible for exposing the Madoff Ponzi scheme), has indeed said that he would share profits with a hedge fund if GE’s market value dropped (as well as being rewarded from the US government if his tip-off information results in financial penalties to GE), but his confidence was apparent when he ominously told CNBC that “WorldCom and Enron lasted about four months … We’ll see how GE does.”