By

Darryl Coote

General Electric said the report accusing it of committing gross accounting fraud “contains false statements of fact.”  EPA-EFE/URS FLUEELER
Aug. 15 (UPI) — A fraud investigator accused General Electric of using accounting tricks to cover up tens of billions in losses in what he calls “a bigger fraud than Enron.”

Harry Markopolos, who blew the whistle on Bernie Madoff‘s massive Ponzi scheme in the 2000s, released a 170-page report Thursday that accused U.S. blue-chipper GE of committing $38 billion in accounting fraud, amounting to over 40 percent of its market capitalization.

The report focused on GE’s insurance business and stated the company’s next move will be to file for Chapter 11 bankruptcy as it is dealing with negative cash flow.

“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,” Markopolos said in his report. “The only winners are GE’s fat cat executives who enrich themselves with underserved bonuses as they drove this once-proud beacon of American business in the ground.”

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“I encourage you to hold them accountable,” he said.

GE shares fell 11 percent to $8.01 a share on Thursday following the release of the report, the steepest drop it’s experienced in more than a decade.

GE dismissed the report as false, saying it is “market manipulation.”

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“Mr. Markopolos’s report contains false statements of fact and these claims could have been corrected if he had checked them with GE before publishing the report,” GE Chairman and CEO Lawrence Culp, Jr., said in a statement.

Leslie Seidman, GE director and chair of the company’s Audit Committee, said the report contained “numerous novel interpretations and downright mistakes” while accusing him of benefiting from the market’s reaction to the report.

“He is selectively front-running widely reported regulatory processes and rigorous investigations without the benefit of any access to GE’s books and records,” she said. “I urge readers to carefully consider the motivation behind this report.”

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On his website, Markopolos disclosed that he had entered into an agreement with an unknown third party that in exchange for allowing it to view the report before it was published he would receive a percentage of the profits from its stake in the devaluation of GE securities.

Markopolos said the report was based on seven months of analyzing GE’s accounting into eight of its largest Long-Term care insurance deals and “we believe the $38 billion in fraud we’ve come across is merely the tip of the iceberg.”

He said the degree of fraud surpasses that of “Enron and WorldCom combined,” two of the United State’s biggest accounting scandals.