General Electric: We operate with 'integrity,' stand by our financial reporting

Brian Sozzi
Editor-at-Large

GE hasn’t forgotten about its crazy week.

The industrial giant — under fire from new research by Bernie Madoff whistleblower Harry Markopolos — apparently had a long weekend, talking with many interested parties.

And it issued a defense of its practices on Monday. “Finally, some of questions I’ve been receiving go straight to the heart of GE’s culture, so let me be clear: we operate with absolute integrity and stand behind our financial reporting,” GE’s vice president of investor relations Steve Winoker wrote in his latest newsletter Monday morning. “We are focused on delivering on our strategic priorities and we remain committed to providing accurate, complete and timely financial information to you. Our team remains confident in our company’s long-term strengths; in addition to the executive and director stock purchases I mentioned last week, GE Gas Power CEO Scott Strazik also purchased another 34,836 shares on Thursday.”

Markopolos — whose fresh research on GE is allegedly being used by a hedge fund that reportedly shorts the industrial giant’s stock —dubs the company “GEnron.”

“I believe I have a few smoking guns on GE,” Markopolos told Yahoo Finance’s The Final Round last week, adding that information was held back from the report for law enforcement. He said it took seven-and-a-half months to complete the report and it was “self-funded.”

Markopolos said the next chapter for GE (GE) is Chapter 11 bankruptcy.

Several allegations from Markopolos’ report include:

  • GE has committed a $38 billion fraud primarily by hiding losses.

  • GE will not be cash-flow positive by 2021 as executives have suggested.

  • GE is not liquid right now.

  • A recession could tip GE into Chapter 11 bankruptcy.

GE’s stock rallied 9.4% on Friday as investors viewed the stock purchases by executives favorably.

Winoker refuted Markopolos’ claims on GE’s insurance reserves on Monday.

“First and foremost, we believe that our current reserves are well-supported for our portfolio characteristics. Our future liabilities depend on variables that will play out over decades, not years, and are dictated by rigorous testing processes, sound actuarial analysis, and the application of regulatory and accounting rules,” Winoker wrote.

Brian Sozzi is an editor-at-large and co-host of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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