Running Top Forensic Algorithms On 2012-2019 GE Financials

Aug. 19, 2019 9:30 AM ETGeneral Electric Company (GE)42 Comments


  • On the heels of Harry Markopolos' accusations that GE has engaged in fraud larger than Enron or Worldcom, do forensic algorithms support these allegations?
  • Out of curiosity I ran the scores from four top forensic algorithms that check for earnings manipulation, financial irregularities and bankruptcy risks.
  • The Piotroski F-score also was included as a robust fundamental algorithm that assesses value conditions.
  • Some patterns emerged that may be of significance, especially in the 2016/2017 reporting periods.
  • This idea was discussed in more depth with members of my private investing community, Value & Momentum Breakouts. Get started today »

Do Forensic Algorithms Signal Any GE Financial Fraud?

I took a quick look to see if any of the top forensic algorithms commonly used by certified fraud examiners show any unique signals ahead of the accusations released on GE (NYSE:GE). Part of my regular stock analysis and selections include articles of the most positive and negative forensic stocks in the market: Forensic Stock Analysis For August: Do You Own These Stocks?

I also used certain combinations of forensic scores to predict stock price performance like Tesla's (TSLA) recent 40% decline:The 3 Largest Stocks Now Scoring Worse Than Tesla Before Its 40% Decline.

These models are designed to flag certain elements where examiners could look deeper to assess conditions of a company. I would expect some irregularities to show up on the heels of such a strenuous accusation against GE. Certainly other methods and models were brought to bear in the Markopolos' analysis, but curiosity compels me to see what the resulting scores are for General Electric. The full Harry Markopolos, CFA, CFE, report is available on Scribd here.

A key assertion from the Whistleblower Report spans from 2012 through 2018:

"We calculated GE should have taken a reserve hit as early as 2012, and certainly no later than 2015, but they waited until new management came in and booked what little reserve they could afford in late 2017/early 2018, a $15 billion commitment that they had to request a special exemption from the Kansas Insurance Department (KID) to spread over a seven-year period because, plainly put, GE isn’t liquid right now and likely won’t survive long enough to make their last few years of reserve payments anyway."

Forensic Algorithms on GE from 2012 through Q2 2019:


Certainly a $15 billion alteration from 2012 with application to the books in 2017

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This article was written by

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Revealing the best financial models targeting double digit success

Welcome! I am a Finance PhD, MBA, investment adviser, fraud examiner and certified anti-money laundering specialist with more than 30 years trading and investing stocks and other securities. I'm the founder of Value & Momentum Breakouts.


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