Trying to download GE fraud report...no luck
- Thread starter kj5159
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Robert Morse
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Maybe the link is spam. I would avoid that website.
https://news.bloomberglaw.com/merge...er-hughes-board-into-merger-fraud-suit-claims
I don't have Bloomberg Law but it being posted yesterday is very interesting. I'm very tempted to get short GE here but I don't have any info besides these articles.
There could be investigations and legal battles etc. that could take months or years, no way to tell. How long was the Enron thing beginning when it went public to the end?
GE were already under investigation for Accounting wizardry... I read dif sources, he focuses on the fact GE puts aside 79k per Insurance liability, when Industry standard is 110k or so, and they hide their losses through marking assets higher then worth, changing accounting standards every 3 years and not doing revenue splits in earnings.
Marking assets falsely, every big bank does it... HSBC and DB are prime examples, it's become almost industry norm
Here it is, CNBC manged to embed it in their page: https://www.cnbc.com/2019/08/15/heres-the-full-report-calling-ge-a-bigger-fraud-than-enron.html
GE is done, finito like Danny Devito! Ima get ready soon to go deep in the 175 pages but it's clear as day this was Bob Rubin trade that started under previous CEO's. Those 401 K's ?
GE was able to hide its LTC liabilities for a long, long time because its actuaries are about as independent as KPMG, GE’s auditor for the past 110 years, and the ratings agencies. All are getting paid by GE, so of course they’ll never question GE’s LTC reserves. That GE had to add $15B to LTC reserves, in late 2017/early 2018, which shocked GE’s long-suffering investors, shows how independent, competent and credible their external actuaries and auditors are.
When you benchmark GE to a responsible insurance carrier using going concern accounting such as Prudential (PRU), GE needs $18.5 Billion in additional reserves in order to be able to pay claims. We compare GE’s LTC policies to Prudential and Unum, two insurers with similar pre-mid-2000’s vintage LTC policies, but whose policies have much lower risk characteristics than GE’s. Prudential’s 2018 loss ratio on similar policies was 185% and they’re reserving $113,455 per policy while GE’s loss ratios are several times higher and they’re only reserving $79,000 per policy. Just to match Prudential’s level of reserves would require an immediate $9.5 Billion increase in reserves.
Unfortunately for GE, the LTC policies they’re reinsuring have much worse risk characteristics than PRU’s and even $113,455 in reserves per policy totaling $9.5 Billion, would not be nearly enough. Here are the comparisons between the two:
1. GE’s Premiums Per In-Force Life are only $1,133 vs. PRU’s $2,723.
2. GE’s Average Attained Age is 75 vs. PRU’s 68.
3. GE’s % of Policies not paying premiums is 26% vs. PRU’s 2%.
4. GE provides Lifetime Benefits on 70% of its policies vs. PRU’s 24%.
5. GE has no ability to raise premiums because it is only a reinsurer while PRU can and is able to file its own requests for rate increases with state departments of insurance.
Risk Factor # 1, GE is taking in only 41.6% of the premium dollars per policy ($1,133/$2,723). The present value of GE’s $1,590 premium shortfall ($2,723-$1,133) per policy vs PRU adds another $3.6 Billion in additional required reserves.
Risk Factors # 2 - # 5 add another $5.4 Billion in new required reserves. GE’s benefits being paid out are much higher since it’s on the hook for lifetime benefits on 70% of its policies and its insureds are 7 years older than PRU’s and far more likely to be filing claims in the very near term. Only 74% of GE’s policies are still paying premiums vs 98% of PRU’s. 7% of GE’s LTC policies aren’t paying premiums because those insureds have filed claims and are receiving policy benefits. What GE’s “Teach -In” didn’t explain is why the other 19% of their LTC policies aren’t paying premiums. There’s a lot of additional critical information that GE is withholding from public view which we’ve included in our report, so we encourage you to read it.
If the $18.5 Billion in additional required reserves weren’t bad enough, GE also has a $10.5 Billion difference between its $30.4 Billion in statutory reserves and it’s $19.9 Billion of GAAP reserves. This $10.5 Billion difference will lead to a $10.5 Billion non-cash charge to earnings between now and the new insurance accounting rule change which goes into effect in 1QTR 2021. This will result in a devastating $10.5 Billion hit to GE’s already thin shareholder’s equity cushion and put its credit rating and debt covenants at grave risk. Responsible insurance carriers such as PRU and Unum have already taken these charges against earnings in 2018 because they’re using going concern accounting while GE is playing for time, praying for miracles and trying to avoid bankruptcy. To summarize, GE is hiding $29 Billion in additional LTC losses from investors and our Whistleblower Report will walk you through the details using figures provided by eight of GE’s LTC counter-parties. Either those eight companies are lying and reporting false data or GE is.
GE was able to hide its LTC liabilities for a long, long time because its actuaries are about as independent as KPMG, GE’s auditor for the past 110 years, and the ratings agencies. All are getting paid by GE, so of course they’ll never question GE’s LTC reserves. That GE had to add $15B to LTC reserves, in late 2017/early 2018, which shocked GE’s long-suffering investors, shows how independent, competent and credible their external actuaries and auditors are.
When you benchmark GE to a responsible insurance carrier using going concern accounting such as Prudential (PRU), GE needs $18.5 Billion in additional reserves in order to be able to pay claims. We compare GE’s LTC policies to Prudential and Unum, two insurers with similar pre-mid-2000’s vintage LTC policies, but whose policies have much lower risk characteristics than GE’s. Prudential’s 2018 loss ratio on similar policies was 185% and they’re reserving $113,455 per policy while GE’s loss ratios are several times higher and they’re only reserving $79,000 per policy. Just to match Prudential’s level of reserves would require an immediate $9.5 Billion increase in reserves.
Unfortunately for GE, the LTC policies they’re reinsuring have much worse risk characteristics than PRU’s and even $113,455 in reserves per policy totaling $9.5 Billion, would not be nearly enough. Here are the comparisons between the two:
1. GE’s Premiums Per In-Force Life are only $1,133 vs. PRU’s $2,723.
2. GE’s Average Attained Age is 75 vs. PRU’s 68.
3. GE’s % of Policies not paying premiums is 26% vs. PRU’s 2%.
4. GE provides Lifetime Benefits on 70% of its policies vs. PRU’s 24%.
5. GE has no ability to raise premiums because it is only a reinsurer while PRU can and is able to file its own requests for rate increases with state departments of insurance.
Risk Factor # 1, GE is taking in only 41.6% of the premium dollars per policy ($1,133/$2,723). The present value of GE’s $1,590 premium shortfall ($2,723-$1,133) per policy vs PRU adds another $3.6 Billion in additional required reserves.
Risk Factors # 2 - # 5 add another $5.4 Billion in new required reserves. GE’s benefits being paid out are much higher since it’s on the hook for lifetime benefits on 70% of its policies and its insureds are 7 years older than PRU’s and far more likely to be filing claims in the very near term. Only 74% of GE’s policies are still paying premiums vs 98% of PRU’s. 7% of GE’s LTC policies aren’t paying premiums because those insureds have filed claims and are receiving policy benefits. What GE’s “Teach -In” didn’t explain is why the other 19% of their LTC policies aren’t paying premiums. There’s a lot of additional critical information that GE is withholding from public view which we’ve included in our report, so we encourage you to read it.
If the $18.5 Billion in additional required reserves weren’t bad enough, GE also has a $10.5 Billion difference between its $30.4 Billion in statutory reserves and it’s $19.9 Billion of GAAP reserves. This $10.5 Billion difference will lead to a $10.5 Billion non-cash charge to earnings between now and the new insurance accounting rule change which goes into effect in 1QTR 2021. This will result in a devastating $10.5 Billion hit to GE’s already thin shareholder’s equity cushion and put its credit rating and debt covenants at grave risk. Responsible insurance carriers such as PRU and Unum have already taken these charges against earnings in 2018 because they’re using going concern accounting while GE is playing for time, praying for miracles and trying to avoid bankruptcy. To summarize, GE is hiding $29 Billion in additional LTC losses from investors and our Whistleblower Report will walk you through the details using figures provided by eight of GE’s LTC counter-parties. Either those eight companies are lying and reporting false data or GE is.
This is the best short Thesis I have ever come across... Kpmg will catch some bad press, but I doubt any heat. Next week might be the start of something very ugly, the effect it will have on it's bonds getting downgraded to junk in the coming weeks, the size of total debt involved and impact it will have in junk, they're a fraud with massive accounting wizardry over the years, this is Enron but bigger losses... Quote passage :
It took several months of hard work using dozens of publicly available sources. We read 2002-2018’s Annual Reports and 10-K’s, while modeling lots of different performance metrics and accounting entries. Seeing GE change their numbers without earnings restatements was alarming enough. What was worse, GE would change its reporting formats every 2-4 years to prevent analysts from being able to make comparisons across time horizons! In other words, GE went out of its way to make it impossible to analyze the performance of their business units. Why would a company do that?
We could only think of two reasons: 1) to conceal accounting fraud or 2) because they’re so incompetent they’re not capable of keeping proper books and records. I’m not sure which reason is worse because both are bad and each is a path to bankruptcy.
One technique used was what’s called Sherlock Holmes’ “dog that didn’t bark method” of looking at what didn’t appear on GE’s financial statement but should have. That “missing dog” was everything between top line revenue and profit margin, in other words all of the many expenses it takes to run a legitimate business. GE would post revenue numbers for its business units and then give you their profits with no expenses listed between the top and bottom lines.
Other companies competing with GE, or in the case of Safran, GE’s 50/50 joint-venture partner at jet engine manufacturer CFM, would report its expenses, R&D costs, tax credits, etc., while GE, for the same joint-venture would only report the top and bottom lines. What was most interesting here was that Safran acknowledged in their 2017 Registration Document (p. 50) that they were losing money on each LEAP engine produced and only hoped to cover their Cost of Goods Sold (COGS) by the end of the decade. So, if LEAP engines were over 51% of CFM’s jet engine sales in 2018, and they didn’t even cover the COGS on each engine sold, how did GE Aviation’s free cash flow go up so much in 2018? Two answers come to mind: 1) GE Aviation is using gain on sale accounting using some sort of mark-to-model basis and/or 2) GE is fabricating its numbers. Keep in mind that GE was caught doing both by the SEC in August 2009 and lightly punished, committing over $3.4 Billion in accounting fraud while GE’s long-suffering shareholders paid $50 Million in fines and management, KPMG, and the Audit Committee all got to keep their jobs. What lesson did GE’s management learn? If you guessed, accounting fraud leads to bigger bonuses and no one gets fired and no one goes to jail, well, that’s my guess too.
It took several months of hard work using dozens of publicly available sources. We read 2002-2018’s Annual Reports and 10-K’s, while modeling lots of different performance metrics and accounting entries. Seeing GE change their numbers without earnings restatements was alarming enough. What was worse, GE would change its reporting formats every 2-4 years to prevent analysts from being able to make comparisons across time horizons! In other words, GE went out of its way to make it impossible to analyze the performance of their business units. Why would a company do that?
We could only think of two reasons: 1) to conceal accounting fraud or 2) because they’re so incompetent they’re not capable of keeping proper books and records. I’m not sure which reason is worse because both are bad and each is a path to bankruptcy.
One technique used was what’s called Sherlock Holmes’ “dog that didn’t bark method” of looking at what didn’t appear on GE’s financial statement but should have. That “missing dog” was everything between top line revenue and profit margin, in other words all of the many expenses it takes to run a legitimate business. GE would post revenue numbers for its business units and then give you their profits with no expenses listed between the top and bottom lines.
Other companies competing with GE, or in the case of Safran, GE’s 50/50 joint-venture partner at jet engine manufacturer CFM, would report its expenses, R&D costs, tax credits, etc., while GE, for the same joint-venture would only report the top and bottom lines. What was most interesting here was that Safran acknowledged in their 2017 Registration Document (p. 50) that they were losing money on each LEAP engine produced and only hoped to cover their Cost of Goods Sold (COGS) by the end of the decade. So, if LEAP engines were over 51% of CFM’s jet engine sales in 2018, and they didn’t even cover the COGS on each engine sold, how did GE Aviation’s free cash flow go up so much in 2018? Two answers come to mind: 1) GE Aviation is using gain on sale accounting using some sort of mark-to-model basis and/or 2) GE is fabricating its numbers. Keep in mind that GE was caught doing both by the SEC in August 2009 and lightly punished, committing over $3.4 Billion in accounting fraud while GE’s long-suffering shareholders paid $50 Million in fines and management, KPMG, and the Audit Committee all got to keep their jobs. What lesson did GE’s management learn? If you guessed, accounting fraud leads to bigger bonuses and no one gets fired and no one goes to jail, well, that’s my guess too.
GE might have survived LTC if it had a competent CEO. Unfortunately, GE’s CEO was Jeff “Two-Jet” Immelt, an executive who excelled at overpaying for value-destroying purchases such as Alstom and Baker Hughes, just in time for cyclical downturns. Faced with stagnating to declining revenues, GE engaged in financial engineering, vaporizing $52.2 Billion in stock buybacks from 2012-2018, which was 3.5 times more than GE’s earnings of only $14.9 Billion over that same time period. GE also raised its dividend to unsustainably high levels, paying out $54 Billion, which was 3.6 times GE’s earnings, during that key seven-year period. That $106.2 Billion unwisely spent on financial engineering to keep the bonus train running could and should have been used to: 1) pay for losses to wind-down GE Capital; 2) fund GE’s new additional $29 Billion in required LTC reserves; and 3) eliminate GE’s $27 Billion pension shortfall. Sadly, that $106.2 Billion is gone forever and now GE is on the brink of insolvency. The majority of what’s left inside of GE Capital’s black box is very likely unsaleable unless GE is willing to pay billions to get someone to take these toxic liabilities off its hands.
Unfortunately, most investors are not trained as Certified Fraud Examiners (CFE’s) and have no idea of what forensic accounting analysis entails. The biggest clue that this is an Enronesque accounting fraud were the $53.5 Billion in Negative Surprises in 2017 and 2018 which destroyed over $130 Billion in market capitalization. There were two dividend cuts totaling $8 Billion per year, $15 Billion added to LTC reserves, a $22 Billion goodwill writedown on Alstom, and an $8.5 Billion Long Term Service Agreement (LTSA) restatement of 2016 and 2017 earnings. When you see that many large dollar adjustments in such a short time frame that’s not house-cleaning, it’s a red flag that the prior years’ financial statements were false, internal controls are weak to non-existent, and there are a lot more cockroaches in the GE earnings’ kitchen that you haven’t seen yet. Our Whistleblower Report only details $38 Billion in accounting fraud, but we know we didn’t catch everything. Only GE’s accounting department knows where the rest of the skeletons are buried.
I want to express my sympathy to the one million people who count on GE for either salaries, healthcare, or pensions. Make no mistake, GE’s current and past employees are the victims here as are GE’s lenders, vendors, and customers all of whom have to deal with the aftermath of an accounting fraud. The only winners are GE’s fat cat executives who enriched themselves with undeserved bonuses as they drove this once proud beacon of American business into the ground. I encourage you to hold them accountable. Thank you very much for taking the time to read our Whistleblower Report, we hope you find it informative. Harry Markopolos, CFA®, CFE
Unfortunately, most investors are not trained as Certified Fraud Examiners (CFE’s) and have no idea of what forensic accounting analysis entails. The biggest clue that this is an Enronesque accounting fraud were the $53.5 Billion in Negative Surprises in 2017 and 2018 which destroyed over $130 Billion in market capitalization. There were two dividend cuts totaling $8 Billion per year, $15 Billion added to LTC reserves, a $22 Billion goodwill writedown on Alstom, and an $8.5 Billion Long Term Service Agreement (LTSA) restatement of 2016 and 2017 earnings. When you see that many large dollar adjustments in such a short time frame that’s not house-cleaning, it’s a red flag that the prior years’ financial statements were false, internal controls are weak to non-existent, and there are a lot more cockroaches in the GE earnings’ kitchen that you haven’t seen yet. Our Whistleblower Report only details $38 Billion in accounting fraud, but we know we didn’t catch everything. Only GE’s accounting department knows where the rest of the skeletons are buried.
I want to express my sympathy to the one million people who count on GE for either salaries, healthcare, or pensions. Make no mistake, GE’s current and past employees are the victims here as are GE’s lenders, vendors, and customers all of whom have to deal with the aftermath of an accounting fraud. The only winners are GE’s fat cat executives who enriched themselves with undeserved bonuses as they drove this once proud beacon of American business into the ground. I encourage you to hold them accountable. Thank you very much for taking the time to read our Whistleblower Report, we hope you find it informative. Harry Markopolos, CFA®, CFE