A whistleblower – who pointed out Bernie Madoff’s Ponzi scheme that years before it imploded in 2008 – accused General Electric (GE) America’s once most valuable company of accounting fraud.
He has accused the company of hiding $38 billion in losses, i.e. 40% of its market value. And called it “a bigger fraud than Enron.” (Enron declared bankruptcy in 2001 after it came out that the company had inflated its earnings.)
What’s GE’s Response
GE’s share price fell 15% in response to this news. Officials of GE, have rejected the allegations stating it is ridiculous and it’s CEO even bought $2m worth of GE shares on Friday just to demonstrate that GE’s management still believes the company is worth investing in. Wall Street analysts are, for now, still rooting for the company despite the allegations.
Big Picture: GE’s fraud claim doesn’t have to be true to hurt it as this brings about a loss of credibility and a lot of scrutiny into the practices of GE.
Dig Deeper: Read the 175-page report