Did GE make false accounts? Accountant: More serious than Enron

According to Mark Polos, who exposed Bernie Madoff's super Ponzi scheme, GE has become a zombie business. Who is right? Was it the detective who exploded Bernie Madoff's super Ponzi scheme, or the authoritative board of General Electric and the prestigious CEO? However, GE's top management team has made significant progress in rescuing and reshaping the troubled company, which has earned praise from Wall Street. Harry MacPolos, an investigative accountant who once pulled Madoff off his horse, published an explosive report on August 16, General Electric: A bigger scam than Enron, claiming that GE had committed $38 billion in accounting fraud. He accused the former industrial and financial giant of deliberately not reserving enough reserves to cope with huge short-term and future losses in its long-term care insurance business, and of violating U.S. accounting standards by failing to record a huge write-down for its Baker Hughes General Electric Energy Department. According to Mark Polos, GE has become a zombie business. He said that Enron and WorldCom collapsed four months after their epic fraud was exposed, so GE would not collapse any slower. "It's sooner or later that GE goes bankrupt," he said on CNBC.

Mark Polos is not just targeting GE, led by former Chief Executive Jeffrey Immelt, but also accusing GE's current executive team of not only ignoring its obscure financial statements, but worsening the situation. In an interview with Yahoo Finance and Economics, he said that "GE's financial statements are basically unreadable" and "I doubt" whether CEO Larry Karp can understand them. Asked if the CEO and CFO had covered up, he said, "I think so." So why didn't Mark Polos allow GE to review what it found before it went public? Mark Polos told Yahoo Finance and Economics interviewers, "Who would be willing to talk to counterfeiters, and would they have to cover up all this?"

Mark Polos'accusation of current executives caused a stir because GE recently appointed a highly respected CEO and formed an almost new and prestigious board of directors. These directors, including the former chief accountant of the United States, have deep expertise in the areas of fraud and abuse of power just mentioned in the report. GE's stock trading showed that Wall Street was indifferent to the catastrophic results described by Mark Polos, despite a new round of investor concerns triggered by the report. GE shares fell 11.3% after the report was released, but then rebounded strongly on Friday, narrowing the decline to a modest 2.7%. After the release of the report, the $2.2 million Carl Phough's move to buy shares in the company apparently gave investors a reassuring shot. The duel is one of the most exciting and important events in the history of American enterprises. Investigators claimed that the seemingly exceptionally competent team did not understand the accounting methods adopted by the company and did not realize that the company was basically on the verge of bankruptcy - or even could fabricate accounts, but GE said that the attacker had misinterpreted the figures in order to arbitrage earnings by short-selling its shares. 。 This is an extremely important issue, because other companies in trouble may also encounter the same problem. Is it possible that a smart and competent new CEO and an expert board of directors are so unaware of this complex and obscure business that they regard a company that is actually on the verge of bankruptcy as a baby for a comeback?

Through a dialogue with GE insiders, they learned that they believed that Mark Polos conspired to use false but very eye-catching charges to pull down stock prices, and then made a fortune. Mark Polos himself admitted that he was working with an undisclosed hedge fund and would take a share of the fund's earnings from shorting GE shares. The timing is perfect: GE has just announced that its chief financial officer is leaving, and financial managers wonder if there will be any negative news coming out. Insiders insist that Mark Polos uses the hard-to-characterize nature of long-term care insurance accounting methods. This is an extremely complex area, and based on complex life assumptions and discount rates, its analysis can make everyone feel headache. They suspect that the mysterious fund made a quick buck for itself and Mark Polos by selling its short-term holdings during a short period of panic. General Electric's leadership, like any team in American companies, does not seem to be such a deceptive leader. Karp, who became CEO on October 1st, helped another industrial giant, Danaher Group, achieve great success, increasing its share price more than four times between 2001 and 2014. In many critical situations, the CEO of the sudden airborne superstar has little opportunity to seriously assess the company's problems from within, and then is caught by a series of surprises. But Karp had been on GE's board for six months before, so he was able to get a close look at all of the company's businesses and make a clear decision.