General Electric renews defense against charges of bogus accounting

NEW YORK: General Electric Co further defended itself on Monday against fraud investigators who said last week the Boston-based conglomerate had failed to put aside money to cover US$29 billion in potential insurance losses and had improperly counted profit from subsidiary Baker Hughes as its own.

"Our future liabilities depend on variables that will play out over decades, not years, and are dictated by rigorous testing processes, sound actuarial analysis, and the application of regulatory and accounting rules," Steve Winoker, head of investor relations at GE, said in a six-page rebuttal sent out via email."As a majority shareholder of BHGE," Winoker added,"we are required to report BHGE on a consolidated basis under U.S. GAAP" accounting rules.

GE's comments follow a report last week that alleged there was fraud in the company's accounting. GE has disclosed that its accounting is being investigated by the U.S. Securities and Exchange Commission and the Department of Justice. GE's shares fell as much as 15per cent on Thursday after financial investigators Harry Markopolos and John McPherson published the 175-page report. GE shares recouped much of the decline on Friday. On Monday, GE shares were down 0.3per cent at US$8.77 in late morning trading.

Markopolos, best known for raising early alarms about Bernard Madoff, who was arrested in 2008 for running a Ponzi scheme, said he would share in profits from a midsized U.S. hedge fund that sold GE shares short before the report came out. Short sales are bets that a share price will fall.

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