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John C. Coffee Jr. John C. Coffee Jr.

The recent campaign of Harry Markopolos and his allies in attacking General Electric’s accounting is fascinating, challenging, and hard to evaluate, but clearly it demonstrates that we need to rethink the current legal treatment of short selling and “negative activism”. To briefly recap, Mr. Markopolos, who was, of course, the first to publicly proclaim that Bernie Madoff was running a giant Ponzi scheme, accused G.E. in August of being “A Bigger Fraud than Enron.” Specifically, he produced a lengthy report (and an associated Power Point display designed to educate accounting-challenged journalists) that alleged a $38 billion accounting fraud at G.E. The key claims were that G.E. was “hiding $29 billion in Long-Term Care Losses” with respect to its insurance operations and was also concealing “$9.1 billion in Baker Hughes losses.” See “General Electric, A Bigger Fraud Than Enron,” www.gefraud.com (hereinafter, “GE Fraud”).

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