FILE PHOTO: A traffic light is seen in front of a logo of General Electric at the company’s plant in Birr, Switzerland June 17, 2019. REUTERS/Arnd Wiegmann/File Photo
NEW YORK (Reuters) – General Electric Co (GE.N) further defended itself on Monday against fraud investigators who said last week the Boston-based conglomerate had failed to put aside money to cover $29 billion in potential insurance losses and had improperly counted profit from subsidiary Baker Hughes (BHGE.N) as its own.
“Our future liabilities (on long-term care insurance) depend on variables that will play out over decades, not years, and are dictated by rigorous testing processes, sound actuarial analysis, and the application of regulatory and accounting rules,” Steve Winoker, head of investor relations at GE, said in a six-page rebuttal sent out via email.
“As a majority shareholder of BHGE,” Winoker added, “we are required to report BHGE on a consolidated basis under U.S. GAAP” accounting rules.
GE’s comments follow a report www.gefraud.com last week that alleged there was fraud in the company’s accounting. GE has disclosed that its accounting is being investigated by the U.S. Securities and Exchange Commission and the Department of Justice.
GE’s shares fell as much as 15% on Thursday after financial investigators Harry Markopolos and John McPherson published the 175-page report. GE shares recouped much of the decline on Friday. On Monday, GE shares were down 0.3% at $8.77 in late morning trading.
Markopolos, best known for raising early alarms about Bernard Madoff, who was arrested in 2008 for running a Ponzi scheme, said he would share in profits from a midsized U.S. hedge fund that sold GE shares short before the report came out. Short sales are bets that a share price will fall.
Reporting by Alwyn Scott in New York; Editing by Matthew Lewis