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Is GE a Fraud?

https://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2019/8/15/2019_08_15_GE_Whistleblower_Report.pdf

This is my accounting fraud team’s ninth insurance fraud case in the past nine years and it’s the biggest, bigger than Enron and WorldCom combined. 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. Enron’s CEO, Jeff Skilling resigned on August 14, 2001, Enron was downgraded to junk status on November 28th and filed for bankruptcy protection on December 2nd. On March 11, 2002 WorldCom received document requests from the SEC related to its accounting and loans to officers; on April 30th CEO Bernie Ebbers resigns regarding his $400 million in personal loans from the company, then on June 25th CFO Scott Sullivan is fired before WorldCom files Chapter 11 on July 21st. It’s been 17 years since WorldCom so we’re long overdue for something like GE. As you read our slide deck you’ll see that GE utilizes many of the same accounting tricks as Enron did, so much so that we’ve taken to calling this the “GEnron” case

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This guy is working with some hedge fund who was short GE ahead of the report. He had better be very sure of this conclusion if he doesn’t want to be charged with securities manipulation.

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“It’s been 17 years since WorldCom so we’re long overdue for something like GE. “

Uhhh wut?

I rarely visit these forums anymore but I came here to see if this was a topic.  In my opinion, our fellow CFA charterholder Harry Markopolos deserves the benefit of the doubt based on his attempts to expose Madoff.  In the decade since, has he thrown all ethics out the window to make a quick buck by assisting an un-named hedge fund to short GE?  I don’t know.  I doubt he’s doing this for a quick book but on the other side I’m skeptical his accounting knowledge is greater than that of GE & KPMG.  But then, Enron had AA vouching for their accounting treatment until it all collapsed.  I highly recommend his book “No One Would Listen” and I look forward to seeing how this GE story plays out.  I have no conflicts to disclose as all my investable assets are in target dated funds, index funds, cannabis stocks, and online sports book accounts.

Even if this guy didn’t have any conflicts of interest I’d be extremely skeptical. It’s nearly impossible to nail two gigantic calls in one lifetime. Examples off the top of my head of people that made one great call then tried to make others to stay relavent only to fall into obscurity when they were proven wrong: Meredith Whitney, David Rosenberg, John Paulson, Dennis Gartman, Peter Shiff, and Bruce Berkowitz. 

I’m not saying people can’t have sustained success in this industry. But it’s normally by hitting singles and doubles more often than not. Not by only hitting grand slams. The people above suffered from extreme overconfidence bias and ended up costing investors billions. This whistleblower dude seems to fit in this group.

yikes i rmemeber berkowitz made some pretty bad bets recently. like sears. he was a big old school value guy that made concentrated bets. value trap caught him. retail amirite. it goes 0 to 100 real quick but vice versa too

I love my cheese. I got to have my cheddar.