
General Electric: A Bigger Fraud Than Enron - airstrike
https://www.gefraud.com/
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ma2rten
Previous Discussion:

[https://news.ycombinator.com/item?id=20705449](https://news.ycombinator.com/item?id=20705449)

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Eiriksmal
I clicked the link to download the report. The disclosure you have to agree to
is _very_ interesting:

>Prior to the initial distribution of this Report on August 15, 2019, the
Company entered into an agreement with a third-party entity to review an
advanced copy of the Report in exchange for later-provided compensation. That
compensation is based on a percentage of the profits resulting from the third-
party entity’s positions in the securities, derivatives, and other financial
instruments of, and/or relating to, General Electric Company (“GE”) (NYSE:
GE). Those positions taken by the third-party entity are designed to generate
profits should the price of GE securities decrease.

So there exists a class of professional services designed to temporarily crash
stock prices to make short sellers money? Curious.

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jdietrich
_> So there exists a class of professional services designed to temporarily
crash stock prices to make short sellers money?_

Yes. The technical term is "activist short selling". The broad consensus is
that it's good for the market, as it provides an incentive for investors and
researchers to uncover fraud and mismanagement. Obviously someone _could_ just
make up a bunch of nonsense about a company to try and tank their share price,
but that's all sorts of illegal.

I think it's valid to think of activist short selling as a kind of distributed
bug bounty program for the financial markets.

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tylerl
Ok, but imagine a bug bounty program where you're paid based on how damaging
your website is to the product's short term reputation, regardless of whether
you've actually disclosed (or even found) anything or substance.

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wyxuan
Not really. Its illegal to lie like that and you can get sued for defamation.
Plus your reputation is at stake. If I said GE is a fraud then no one believes
me. But if Bill ackman calls it a fraud, that turns ears.

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londons_explore
Read the report. There are no non-published assertions in it.

They're all either publicly available numbers, or an analysts opinions. It
would be very hard to sue them.

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loganfrederick
Another famous short seller, Citron, issued their counterargument to this
report: [https://citronresearch.com/wp-
content/uploads/2019/08/Citron...](https://citronresearch.com/wp-
content/uploads/2019/08/Citron-Issues-Comment-on-General-Electric-and-
Markopolos-Report.pdf)

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valar_m
>“They moved their headquarters to Boston last year. My hometown. I don’t
appreciate when you’re running a scam in my hometown.”

>The arrogance of that statement alone discredits his whole argument.

What? I had never heard of Citron before five minutes ago, but that's an
embarrassingly terrible analysis. Do people trust the advice of this Citron
with their own actual money?

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et2o
That's Citron quoting the authors of the GE report...

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Semaphor
I assume GP is saying that Citron’s reply to the quote is what makes them look
bad. So this:

> The arrogance of that statement alone discredits his whole argument.

And I must say that struck me the wrong way as well.

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sho
Direct link to the report:
[https://fm.cnbc.com/applications/cnbc.com/resources/editoria...](https://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2019/8/15/2019_08_15_GE_Whistleblower_Report.pdf)

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mrfredward
At GE's low after the report, it had fallen about 14% for a loss of $10
billion in market cap. You could interpret this as the market assigning an
expected value of fraud at GE of $10 billion. The report claims $38 billion in
fraud, so either market participants don't believe the accusation, or fraud
was already priced in.

The stock has rebounded since, so seems like the big market voting machine
thinks this report is bunk. Time will tell who is right.

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unreal37
Reading the report, he seems to be dipping into "future forecasting" quite a
bit.

"First, a stiff recession after ten years of domestic economic growth, will
see that the next chapter in GE’s history is Chapter 11."

You can't predict a recession, or when it comes how it's going to go, so how
is that "first" when it comes to discovering accounting fraud?

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avs733
yeah I'm surprised as I read through this a lot of it seems predicated on
assumptions of what will happen outside of GE. I'm far from a finance guru
(but I did buy some holiday IHG stock last night)...but this one doesn't read
as fraud as much as a time bomb that could blow up at any moment, it just
hasn't yet. Fraud is an entirely different level of claim. Dishonesty about
the risk...sure...probably GAAPish'ing your way into a higher than deserved
stock price...sure. But I can't even parse through the reports repetitions of
the same information over and over with increasing strident bolded red text
and skull and cross bones emojis what is the core thesis.

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unreal37
He's saying in two years they'll have to disclose losses that they don't have
to disclose today.

Um, OK.

He's saying they don't have the cash in the bank to make a payment that they
have coming due next year.

Um, OK.

Not really fraud, no. I think this is more of a "hope the stock falls in the
future so we can get rich" kind of thing.

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post_below
More info:

[https://www.msn.com/en-us/money/companies/ge-plunges-
after-w...](https://www.msn.com/en-us/money/companies/ge-plunges-after-
whistleblower-calls-it-a-bigger-fraud-than-enron/ar-AAFQjYf)

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chkaloon
People have said GE's numbers have been suspect since at least Jack Welch's
days of year after year profit growth. But this looks kind of weasely.

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spectramax
I find the title whimsical because GE actually bought part of Enron after its
collapse, specifically GE Wind is a spinoff of Enron's wind energy division.

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all_blue_chucks
The fact that the CEO of GE bought $3MM of shares after this report first came
out makes me suspect it is, at the least, overblown.

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Ididntdothis
Isn’t $3mm pocket change for these guys? It doesn’t necessarily signal
confidence to me.

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m0zg
Seven figures isn't pocket change for anybody. Unless they're doing this with
someone else's money, that seems like a pretty good signal to me.

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uptown
Here are the details of his compensation agreement:

[https://www.cnbc.com/2018/10/05/new-ge-ceo-larry-culp-
inks-s...](https://www.cnbc.com/2018/10/05/new-ge-ceo-larry-culp-inks-stock-
heavy-contract-worth-up-to-300-million-if-shares-soar.html)

It's very much in his interest to stabilize the stock price.

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m0zg
It's even more of a signal then. If these insinuations were true, there'd be
no point whatsoever to spend $5M to buy shares of the company which he knows
is insolvent. It's not like if this is true his share purchase would buoy all
of GE.

