General Electric issues response about fraud claims

General Electric doubled down on its financial performance and reputation Monday, less than a week after a hefty report accused it of fraud and suggested the conglomerate was headed toward bankruptcy.

GE' s stock plunged more than 11% Thursday after Harry Markopolos, t he whistleblower who raised flags about Bernie Madoff's Ponzi scheme in 2008, published a 175page report alleging the company misled investors in financial statements to the tune of $38 billion. He called GE “a bigger fraud than Enron.”

The company has aggressive ly disputed the report as“meritless .” CEO Lawrence Culp deemed it “market manipulation—pure and simple,” noting that Markopolos stands to gain from a drop in GE's share price. Markopolos has said that he examined GE at the request of an unidentified U.S .- based hedge fund and that he would receive a “decent percentage” of any proceeds the hedge fund earns from shorting its stock.

On Monday, Steve Winoker, vice president of GE's investor communications, expanded on the company's response by addressing specific questions tied to its longterm care insurance unit and Baker Hughes, a GE company and one of the world' s largest oil field services firms.

“We operate with absolute integrity and stand behind our financial reporting,” Winoker wrote in a statement posted to GE's website. “Our team remains confident in our company's long-term strengths.”

With regard to its long-term care ins urance, Winoker wrote that the company's “reserves are well-supported.” He also noted that GE is a reinsurer with a slew of contractual relationships, and that it is not responsible for the entirety of every claim.

Analysts have said GE is up against losses as it doles out claims for longterm care policies, which are used to cover assisted living and nursing home costs. Analysts say t he amount of those potential losses isn' t entirely clear and that they aren't necessarily enough to spur a bankruptcy filing.

Wino ker also noted that since GE is a majority shareholder in Baker Hughes, it is required to report on the company on a consolidated basis under accounting standards adopted by the U.S. Securities and Exchange Commission. Public companies like BHGE are required to issue their own financial sun der securities law, even if those companies are owned by someone else.

Once GE is no longer the controlling owner of BHGE, the sale will trigger a noncash charge. GE recently estimated that loss at $7.4 billion but said it would not affect its cash needs and liquidity.

“This is not intended to be comprehensive ,” Winoker wrote. “These are two significant areas that we want to make sure are understood, and I hope that pointing out some of the specifics behind our company statements will be helpful for your own analysis.”

Culp nabbed $ 2 mil - lion in company stock Thursday, when the price dropped to $ 7.93, in an apparent effort to mollify investors. Friday' s rebound gave it a 9.74% push, to finish at $8.79.

As of Monday afternoon, shares were trading at $8.65.

GE is already under scrutiny for its accounting practices, as it faces investigations from the Justice Department and SEC over a charge to its insurance business and a write-down in its power division.