Leslie Seidman, General Electric board director and chair of the company’s audit committee, told CNBC on Thursday that a report from Madoff whistleblower Harry Markopolos accusing GE of fraud is “full of misleading, inaccurate and inflammatory statements.”
“That report does not reflect the GE that I know,” Seidman said on “Closing Bell. “
Earlier Thursday, Markopolos released a 175-page report on a website claiming that GE issued fraudulent financial statements to hide the extent of its problems.
Markopolos called it a “a bigger fraud than Enron” after having analyzed the company’s accounting for the past seven months. He believes that GE has a long history of accounting fraud which is adds up to $38 billion.
Seidman addressed the allegations of fraud and said, “Fraud is such a strong and inflammatory word, meaning intent to willfully deceive. That is not the GE that I know. We are in full compliance with accounting standards in the U.S.”
One of the areas that the report focuses on is GE’s long-term care insurance unit, where the company had to increase reserves by $15 billion last year. Markopolos claims GE is hiding massive losses and has filed false statements to regulators of the unit.
In response to this accusation, Seidman said: “As part of our normal course of operations, we are going to be performing a current loss recognition test in the third quarter, which is a normal part of GAAP accounting. I think we do have our arms around the accounting. I think that the amount at which we state the reserves currently is fair and in accordance with GAAP.”
The board director also added, “I’m not sure the author of the report really understands the accounting in this area.”
“I stand behind the financial reporting of this company.”
GE’s CEO, Larry Culp, also told CNBC that the accusations from Markopolos were false and driven by market manipulation.
Culp also said that Markopolos never talked to company officials before releasing the report, which “goes to show that he is not interested in accurate financial analysis, but solely in generating downward volatility in GE stock so that he and his undisclosed hedge fund partner can personally profit.”
As a result of these allegations, GE’s shares dropped more than 11% on Thursday.