GE accused of masking financial problems
Investigator Harry Markopolos accused General Electric of engaging in accounting fraud worth $38 billion.
The GE’s stock plunged more than 10% amid a report claiming the company has been misleading investors
Stocks impacted: General Electric (GEC)
According to him, the company is heading for bankruptcy and is hiding $29 billion in long-term care losses. Markopolos said GE’s insurance unit will need to increase its reserves immediately by $18.5 billion in cash with an additional noncash charge of $10.5 billion when new accounting rules take effect in 2021. The 175-page report reveals some more negative surprises, including dividend cuts totaling $8 billion per year, $15 billion added to long-term care insurance reserves, a $22 billion write-down. In turn, GE said Markopolos' claims were unsubstantiated and meritless, and the company stands behind its financial reporting. General Electric stocks fell the most in four months and lost nearly 12% on the news.
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