Enron, which had more than $63 billion in assets at the time, declared bankruptcy on December 2001 in what was then the largest corporate collapse in U.S. history . Roughly 4,000 Enron employees lost their jobs following its collapse. The energy company's downfall began with the discovery of accounting irregularities. Twenty-one people, including former CEO Jeffrey Skilling, were convicted in the scandal, and accounting firm Arthur Andersen was forced out of business after it was found guilty of obstruction of justice.

Culp said the fact that Markopolos never talked to company officials before publishing the report "goes to show that he is not interested in accurate financial analysis, but solely in generating downward volatility in GE stock so that he and his undisclosed hedge fund partner can personally profit."

"GE will always take any allegation of financial misconduct seriously. But this is market manipulation – pure and simple," Lawrence Culp, chairman and CEO of GE said in a statement. "Mr. Markopolos's report contains false statements of fact and these claims could have been corrected if he had checked them with GE before publishing the report."

The stock closed 11% lower in its biggest drop since April 2008, ending the day at $8.01 per share.

"It's going to make this company probably file for bankruptcy," Markopolos told CNBC's " Squawk on the Street ." "WorldCom and Enron lasted about four months. ... We'll see how GE does."

"My team has spent the past 7 months analyzing GE's accounting and we believe the $38 Billion in fraud we've come across is merely the tip of the iceberg," Markopolos said in the 175-page report. Markopolos alleges that GE has a "long history" of accounting fraud, dating to as early as 1995, when it was run by Jack Welch.

A website has been set up to disseminate the report, www.GEfraud.com , where Markopolos calls it "a bigger fraud than Enron." The financial investigator, who was probing GE for an unidentified hedge fund, writes that after more than a year of research he has discovered "an Enronesque business approach that has left GE on the verge of insolvency."

General Electric shares saw their biggest drop in more than a decade Thursday after Madoff whistleblower Harry Markopolos targeted the conglomerate in a new report, accusing it of issuing fraudulent financial statements to hide the extent of its problems.

A year after the Enron scandal broke, long-distance phone company WorldCom, filed for bankruptcy after revelations of an accounting fraud. It had $107 billion in assets at the time.

One area of Markopolos' case focuses on GE's long-term care insurance unit, for which the company had to boost reserves by $15 billion last year. By examining the filings of GE's counterparties in this business, he alleges that GE is hiding massive losses that will only increase as policyholders grow older. He claims that GE has filed false statements to regulators on the unit. Separately, he goes on to find issues with GE's accounting on its oil and gas business Baker Hughes.

The Wall Street Journal first reported on Markopolos' findings.

Markopolos is a Boston-based accounting expert who gained attention after pointing out irregularities with Bernie Madoff's investment strategy, and how it was impossible to generate the returns the fraudster claimed years before the Ponzi scheme was exposed. He was largely ignored at the time. More recently, Markopolos helped uncover a foreign currency trading scandal at a group of banks.

The Markopolos group looking into GE includes forensic accounting veteran John McPherson, co-founder of MMS Advisors, which specializes in the insurance industry.

"GE has been running a decades long accounting fraud by only providing top line revenue and bottom line profits for its business units and getting away with leaving out cost of goods sold, SG&A, R&D and corporate overhead allocations," the report said.

GE's market value as of Wednesday's close was $78.8 billion. With Thursday morning's skid, the market cap was down to $69.9 billion. Markopolos told the paper the insurance unit would need to raise reserves by more than $18.5 billion. He estimates GE's already hefty debt-to-equity ratio of 3:1 would skyrocket all the way to 17:1 if the company restates its actual results.

Here are the main points Markopolos makes in the report which are now available to read online:

"This is my accounting fraud team's ninth insurance fraud case in the past nine years and it's the biggest, bigger than Enron and WorldCom combined. In fact, 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."

"GE utilizes many of the same accounting tricks as Enron did, so much so that we've taken to calling this the GEnron case."

"Of the $29 Billion in new LTC reserves that GE needs, $18.5 Billion requires cash immediately while the remaining $10.5 Billion is a non-cash GAAP charge which accounting rules require to be taken no later than 1QTR 2021. These impending losses will destroy GE's balance sheet, debt ratios and likely also violate debt covenants."

"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."

"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."

GE is already under investigation by the Justice Department and SEC for potential accounting practices. That includes a $22 billion charge the company took in the third quarter related to acquisitions made in its power business.

The struggling industrial conglomerate abruptly removed its former CEO and chairman John Flannery last year after only a year on the job and installed Culp, former Danaher CEO, as his successor.

Flannery had been appointed in August 2017, taking the reins from Jeff Immelt as GE's stock steadily eroded. The company's value had continued set new lows as investors remain unconvinced by Flannery's turnaround vision. Last summer, GE was kicked out of the Dow Jones Industrial Average. It had been the longest-serving component of the blue chip index at 111 years.

Long-term care policies typically pay for end-of-life costs, like nursing homes or assisted living. It's known as one of the more costly and unpredictable parts of the insurance market — especially as the average American lifespan rises. In January 2018, GE reported a $6.2 billion charge based on liabilities in its long-term care business, which is run by the company's financial services unit, GE Capital. To make up for the costs, GE Capital said it needed to set aside $15 billion to hold against potential losses, and stopped paying a dividend to its parent company for the "foreseeable future."

The costs prompted an investor lawsuit and prompted an investigation by the Securities and Exchange Commission, which GE has said it is cooperating with.

GE pointed out that Markopolos gave an unnamed hedge fund he is working with access to the report ahead of time. Markopolos said he has given the report to securities regulators and that certain information he has uncovered has been given to law enforcement only, and is not in the public report.

A disclaimer on the website read: "Prior to the initial distribution of this Report on August 15, 2019, the Company entered into an agreement with a third-party entity to review an advanced copy of the Report in exchange for later-provided compensation. That compensation is based on a percentage of the profits resulting from the third-party entity's positions in the securities, derivatives, and other financial instruments of, and/or relating to, General Electric Company ("GE") (NYSE: GE). Those positions taken by the third-party entity are designed to generate profits should the price of GE securities decrease."

GE reported better-than-expected second-quarter earnings and gave an upbeat outlook for its industrial cash flow — a key metric watched by investors. GE also announced that long-time executive Jamie Miller, who has been with GE since 2008, was stepping down. She was appointed as CFO in 2017 under Flannery.

GE said its power unit is showing "signs of stabilization" but the segment's orders remained sluggish, with $4.9 billion in booked orders, representing a drop of 22% from a year earlier. Revenue fell by 25% year over year in the second quarter, while power barely reported a profit of $100 million.

Here is the full GE statement to CNBC:

"We have never met, spoken to or had contact with this person. While we can't comment on the detailed content of a report that we haven't seen, the allegations we have heard are entirely false and misleading. It's widely known and the WSJ has previously reported that he works for and is compensated by unnamed hedge funds. Such funds are usually financially motivated to try to generate short selling in a company's stock to create unnecessary volatility.



GE stands behind its financials. We operate to the highest-level of integrity in our financial reporting and we have clearly laid out our financial obligations in great detail.



We remain focused on running our business every day and following the strategic path we have laid out. We will not be distracted by this type of meritless, misguided and self-serving speculation and neither should anyone in the investor community."



Addressing Mr. Markopolos's allegations: GE Insurance: We believe that our current reserves are well-supported for our portfolio characteristics, and we undertake rigorous reserve adequacy testing every year. The future implementation of the GAAP insurance accounting standard, which will be highly dependent on a number of variables, will not affect statutory accounting, which drives our funding requirements.



BHGE accounting: As a majority shareholder of BHGE, we are required to report consolidated earnings (under U.S. GAAP law), contrary to what Mr. Markopolos alleges. Further, consolidation of BHGE by GE includes additional disclosure of BHGE's results made through BHGE segment results reporting in the notes to GE's consolidated financial statements. BHGE is also a stand-alone SEC registrant with its own separate SEC filings under Form 10-Q and 10-K as a separate company. In the most recent 10Q, GE disclosed the loss upon deconsolidation of BHGE from a sale of our interest (taking us below our current majority position) would be approximately $7.4B as of 7/26/19. GE's liquidity: Contrary to Mr. Markopolos's allegations, GE continues to maintain a strong liquidity position, committed credit lines, and several executable options to monetize assets. The Company ended the second quarter with $16.9B of Industrial Cash excluding Baker Hughes GE, $12.5B of liquidity at GE Capital and access to $35B of credit facilities. As it relates to GE's leverage targets, as the Company has previously stated during 2Q earnings, it expects to make significant progress towards these goals by the end of 2020.

Read the entire report here.

Correction: An earlier version misstated the years when GE was removed from the Dow Jones Industrial Average and when GE reported a $6.2 billion charge.