Accounting
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If these clowns listened to Peter Olinto & Tim Gearty they wouldn’t never done this crap

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Still thumbing through this but the more I read the more this looks like a hit piece. Of the $30B they estimate as FRAUD, 1/3 of their estimate related to ASU 2018-12 which is not required to be adopted until 2021. They compare it to other insurers who have early adopted which creates a disconnect. They also go after VIE consolidation on GE’s sell down from 62% ownership of Baker Hughes to 50.4 which is obviously above the PRESUMED threshold of consolidation assuming voting power follows. They also go after their segment disclosures as fraudulent but in reality they meet the minimum requirements of GAAP while others may disclose more It’s not straight forward but they aren’t setting themselves up for a great story. Not saying there aren’t dollars to be reserved (yet) but... this is not a clean story.

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likesmarthelpful
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Agreed PWC1. That was known from the start. 👍🏻

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Pwc does the audit for Tesla and Herbalife, so I suppose it’s a race to see who goes under first

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likefunny
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They will in bankruptcy D1. Wait for the equity wipeout and trigger to restructure debt

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If true, and I hope not, it is really bad for the industry and the country

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Good luck automating auditor intuition and judgment in fraud cases. While some automation will occur I think you are over stating things

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Can anyone comment on what goes on behind the scenes in these types of scenarios? Does the audit team from KPMG get called in and have a fire drill to re-review everything in light of a report? I’m curious what tends to happen in the background after news like this hits. In public they obviously put on a brave face and speak confidently but I’m guessing it is chaos behind the scenes

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Re-review? Yeah we’ll get right on that

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GE paid a $50m settlement to the SEC in 2009 for accounting fraud. I’m not sure why so many people in this thread seem to be skeptical of the claims made by the whistleblower The audit committee Chair did an interview on CNBC and she didn’t inspire confidence...just talked about how great the people are that she works with. It would have been nice if anyone from the company actually said they took the time to read the report and spoke to specifics before just making knee jerk appearances in financial media. She mentioned they have another loss recognition test in Q3 2019 for the LTC block so we’ll see what happens...

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It is in this instance since the hit piece has just enough truth to not be a complete fabrication. In some instances it is not legal. This kind is

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It’s hard to get behind this type of thing when the people writing it hold a large short position. I’m sure they unloaded their position some today

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smart
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His point on the LTC reserve deficiency seems reasonable - he made a comparison to the LTC blocks owned by Unum and Pru and GE had very low reserves per policy by comparison... And GE already had to increase their reserves

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Companies get whacked with lawsuits every time there is a restatement. It is clockwork. The lawsuits stick when there is intent or wreck-less behavior. I understand their argument in concept but you have to marry numbers and accounting rules. Until the numbers are lined out and not the sound bite stats I am reserving judgment. Sound bites sound good for a reason

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Been trying to download the report to try and pilfer through the numbers. Without seeing the math and an ability to compare to the accounting standards to see if this is fraud or one of the scenarios where accounting rules and reality may not jive in the way people expect. He went as far as to say they shouldn’t have consolidated Baker Hughes which seemed like a crazy allegation under the VIE model which is predisposed to consolidation

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He also recently made a whistleblowing claim for some banks and made $100k off that

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It would be one thing if he wrote this report believing what he said. It would be another if he intentionally wrote this report not believing it in order to make money - that in itself is the definition of fraud. I guess time will tell if anything happens to GE, KPMG, or Markopolos/hedge company he works for.

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That’s the way I read it. Doesn’t mean you have to like it or agree with it. There is a question of ethics relative to his professional certifications depending on what he has a basis for vs. reality but that isn’t a legal issue

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That's a good point. This does remind me of the movie the Big Short. Maybe there is some truth to the inaccurate reporting (whether intentional or not) which caused the hedge fund the whistleblower worked for to short the stock. Still though this story would be more impactful if Markopolos tried to confront GE first about the possible inaccurate reporting.

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So let me play out a scenario. SEC finds nothing substantial in Markopolos report about GE. Hedge fund he works for has already made millions by shorting GE's stock due to this report. Nothing would happen to him or the hedge fund he works for?

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I believe that is right D2. There’s enough of a basis to say it wasn’t pulled out of thin air but by no means solid footing

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His net worth is estimated between $200-$300M depending on the value of his shares. $2M is a drop in the bucket to spend to try and regain some of his personal losses from today.

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I watched a few of his interviews - one of the other good points he makes is that GE has had a history of consistently large, negative surprises in their financial reporting that they make at the last minute.

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GE does not have a clean history for sure. But, he is alleging fraud not errors. Big difference there.

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