GE mobilizing its troops in war against whistle blower Harry Markopolos

General Electric CEO Larry Culp isn’t backing down, instead, he is assembling the troops to take on a whistleblower accusing his company of financial fraud.

Thursday, Culp purchased $2 million worth of stock as the shares tumbled 11 percent to show he means business. He has now plowed $5 million of his own money into GE shares this week. The company's top brass has also been buying up shares which rebounded in early trading Friday.

GE's staunch defense, which continued Friday as the company reached out to investors updating them on the efforts being made to defend the company after the forensic accountant Harry Markopolos, who gained notoriety by flagging Bernie Madoff’s Ponzi scheme two years before it was dismantled, published a report accusing the company of hiding its problems through fraudulent financial filings.

“This is my accounting fraud team’s ninth insurance fraud case in the past nine years and it’s the biggest, bigger than Enron and WorldCom combined,” Markopolos said in the report. Enron and Worldcom filed bankruptcy in Dec. 2001 and July 2002, respectively, after their accounting frauds were exposed.

Markopolos’ report out Thursday concluded GE’s accounting missteps total $38 billion, or about 40% of its market value. The drop in GE shares was the worst in 11 years.

“The fact that he wrote a 170-page paper but never talked to company officials 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,” Culp told FOX Business in an emailed statement.

And one of GE's independent directors also pushed back against Markopolos' allegations.

“The representations by Mr. Markopolos about GE’s accounting practices are simply not accurate," said GE Independent Director and Audit Committee chair Leslie Seidman, who is also the former chair of the Financial Accounting Standards Board. "The report contains numerous novel interpretations and downright mistakes about the actual accounting requirements, making his conclusions about GE’s reporting questionable at best.”

Culp’s share purchases come as General Electric’s stock is hovering just above record lows set in December. GE shares have lost more than 40% of their value since June 2018, when the company announced a massive restructuring and was booted from the Dow Jones Industrial Average.

“GE will always take any allegation of financial misconduct seriously,” Culp told FOX Business in an emailed statement.

“But this is market manipulation – pure and simple. 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.”

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GE's Troubled Timeline:

2018:

• June: GE was booted from the Dow Jones Industrial Average and announced a massive restructuring, shifting its focus to aviation, power, and renewables.
• October: CEO John Flannery gets the boot and was replaced by Larry Culp. The company then took a $23 billion goodwill charge for its power business. Culp said he would sell assets to raise cash and pay down debt. The SEC and the Justice Department said they would investigate the writedowns. The investigation is ongoing. 
• End of the year: GE sold a $4 billion stake. in the oil-services provider Baker Hughes and announced it would sell a majority stake in the software provider ServiceMax. to the private-equity firm Silver Lake. It was able to bring down debt by $21 billion in the fourth quarter.

2019:

• January: GE altered its agreement with the rail-transport company Wabtec in order to receive $2.9 billion of cash in exchange for giving up more equity.
• March: Warns it could have a negative free cash flow of up to $2 billion this year.
• June: Reports strong first-quarter results, bolstered by its aviation unit.