The financial investigator who brought down Bernie Madoff now targeting General Electric
The accusation is mainly centering around GE’s accounting practices in its long term care business:
Markopolos calls GE “a bigger fraud than Enron,” according to the website, noting 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.”
Markopolos’ report continues, “GE would change its reporting formats every 2-4 years to prevent analysts from being able to make comparisons across time horizons! In other words, GE went out of its way to make it impossible to analyze the performance of their business units.
“Why would a company do that? We could only think of two reasons: 1) to conceal accounting fraud or 2) because they’re so incompetent they’re not capable of keeping proper books and records. I’m not sure which reason is worse because both are bad and each is a path to bankruptcy.”
The full 175-page report is here:
Our ranking does not cover the level of granularities that this forensic accounting report does, but nonetheless it reveals similar messaging: the quality of GE is quite low.
GE only scores 24/100 on our “Quality” metric.
For Quality’s 3 sub-metrics, it scores 35/100 on “Profitability”, 13/100 on “Financial Strength” and 23/100 on “Capital Allocation”.
The report mainly points to the “Profitability” and the “Financial Strength” aspects of GE.
Once GE was a household US bluechip name that is for every pensioner type of stock. Now its market cap is just about 1/15th that of Microsoft.