General Electric plunged 15% after a report of financial fraud

General Electric (N:GE) shares fell as much as 15% on Thursday after fraud investigator Harry Markopolos, who blew the whistle on Bernard Madoff's Ponzi scheme, said GE was concealing deep financial problems.

In a 175-page report, Markopolos accused GE of hiding $38.1 billion in potential losses and asserted that the company's cash situation was far worse than it had disclosed.

"GE's true debt to equity ratio is 17:1, not 3:1, which will undermine its credit status," Markopolos said.

The report says GE is insolvent and asserts that its industrial businesses have a working capital deficit of $20 billion.

The report echoes the assertions of some of Wall Street's more skeptical analysts, who have long raised alarms about GE's low cash flow, frequent accounting charges and writedowns and what they describe as opaque financial reports.

The report adds that "GE's $38 billion in accounting fraud amounts to over 40% of GE's market capitalization, making it far more serious than either the Enron or WorldCom accounting frauds."

In a statement GE said: "We remain focused on running our business every day and ... will not be distracted by this type of meritless, misguided and self-serving speculation."

GE said it "stands behind its financials" and operates to the "highest-level of integrity" in its financial reporting.

GE said Markopolos was known to work for unnamed hedge funds that typically benefit from short selling a company's stock.

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