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General Electric Fraud Accusation


XRay
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General Electric (GE) is a huge corporate conglomerate... well, maybe not huge anymore due to all the downsizing and selling their assets for cash. For the past few years, its stock has went from good to shit.

Just earlier this morning, GE is accused of cooking the books (jargon for committing accounting fraud), and it is bigger than Enron and WorldCom COMBINED. I am not too familiar with the WorldCom scandal, but the Enron scandal involved the parent company creating a ton of subsidiaries or shell companies and then offloading expenses into those entities, Enron does this so it does not have to put those ugly expenses and losses on their own gorgeous financial statements. For an accountant, comparing something to Enron AND WorldCom COMBINED is the equivalent of comparing something to the Holocaust, slavery, and Black Death combined for a historian. Basically, this is a shit-hits-the-fan level of situation and it is a big deal.

Obviously, GE is denying all this and is counter arguing that the whistleblower is just in it to manipulate the market.

Here is the dedicated website addressing the fraud. If you want the report, it asks for your email, and incase you do not want to input your email, here is a link to the report. I am still reading the report (there is 175 pages, and I am probably not going to read all of it), but to summarize the summary, GE is committing insurance fraud by claiming certain incoming cash flow as profits when it should be a liability (e.g.: a bank giving you $20,000 as a loan is not income because you have to pay it back), GE lost money when it sold some of its interest in a spin off company and is hiding that loss, and GE did not disclose to their investors that they have very little working capital (basically all the cash in your wallet and bank you can access like right now, ahora, 今/いま).

Here is a really good quote at the end of the summary.
"I want to express my sympathy to the one million people who count on GE for either salaries, healthcare, or pensions. Make no mistake, GE’s current and past employees are the victims here as are GE’s lenders, vendors, and customers all of whom have to deal with the aftermath of an accounting fraud. The only winners are GE’s fat cat executives who enriched themselves with undeserved bonuses as they drove this once proud beacon of American business into the ground. I encourage you to hold them accountable."
I agree with that sentiment. They are fucking with a million Americans' lives and whoring out an American icon into pieces. Maybe they are not as bad as Epstein and his disgusting rapist associates, but these executives are still giant assholes nonetheless.

I am not sure if this is necessary, but since I see it all the time on financial articles, here are the disclosures. I have a BA in business administration with a focus on accounting. I am not working for any accounting, banking, nor financial service related companies. I am selling my GE stocks and I am also shorting them. And for clarity, GE is ACCUSED of fraud, GE is NOT GUILTY of fraud yet; for all I know, GE could potentially be innocent tomorrow or something.

Here is the YouTube video of the interview with the whistleblower. Unless you have a background in law or money matters, the reading material might be a bit dry or jargony. I think the video does a good job of summarizing the key elements and getting that "HOLY SHIT!!!" feeling across.

 

Edited by XRay
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I misread this as "General Election Fraud Accusation".  ;/

I remember Enron.  It was on the news for quite some time, and I remember talks of how the highest-ups weren't punished as severely as they should've been.  The fact that this is bigger. . .well, that doesn't sound good.  The fact that I haven't heard of it until now is even worse.

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On 8/16/2019 at 11:48 PM, eclipse said:

I misread this as "General Election Fraud Accusation".  ;/

I remember Enron.  It was on the news for quite some time, and I remember talks of how the highest-ups weren't punished as severely as they should've been.  The fact that this is bigger. . .well, that doesn't sound good.  The fact that I haven't heard of it until now is even worse.

I followed GE for about several years now since I used to own some of their stocks. Google somehow figured out I owned their stocks, so I almost always see an article or two about GE when I open up Chrome on my phone. If I did not own GE, I probably would have never heard about it either. Since it is just an accusation right now, it probably is not splashy enough for headline news. However, once the government expands on that investigation and start taking people to court, then I think that is when the news media will start paying attention.

I just hope the one million people who count on GE for their livelihoods can get this news soon so they can start getting prepared and come up with a plan B or something. It would suck to check the mail or turn on the news one day and suddenly find out your retirement plan is completely gone because the news media did not do a good job of covering these things.

— — — — — — —

I figured I might as well do a little update.

After the accusations went public last Thursday, the stock took a nosedive and then bounced back up and hit almost $9.00 per share on Monday. Since then, it has since steadily decreased. Today it opened at $8.17 per share.

I think the bounce back was due to the CEO and a lot of people quickly buying the stock when it plunged, so it restored some confidence into the market. On Monday, GE released a more detailed rebuttal of why they are innocent. However at the same time, one of the rating agencies sort of agreed with the whistleblower that GE might have trouble maintaining its insurance business, and since GE was not able to dismiss the accusations entirely, the market slowly lost confidence in GE again.

Edited by XRay
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