Last week General Motors chairman and chief executive officer Edward Whitacre took to the pages of the Wall Street Journal to make an important announcement: “The GM bailout: Paid back in full.”. Whitacre asserted that GM had paid back all the funds it borrowed from the United States in full with interest.
Whitacre omitted two facts that rendered his column highly misleading. They are the kind of omissions that constitute securities fraud when made by a company in connection with the purchase or sale of a security or when a company reports its financial results.
If any investor bought GM shares based on Whitacre’s column, it appears to me that the investor would have a good claim against GM. The SEC would in any event be warranted in taking a look at Whitacre’s shenanigans on behalf of the company.
First, Whitacre omitted any mention of the remaining $50 billion or so that the government has sunk in the company’s equity. Second, Whitacre omitted any mention of the source of the funds with which GM “repaid” the loan. According to TARP Special Inspector General Neil Barofsky, the source of the funds in whole or in substantial part was the United States government TARP program, not GM earnings. Shikha Dalmia has much more detail on the misrepresentations permeating Whitacre’s public relations blitz in this Forbes column.
Whitacre’s Wall Street Journal column was, in short, a fraud. But it was a fraud of a special kind. It was a fraud committed with the assistance if not the urging of the Obama administration. It was not, in short, the kind of fraud that Michigan Senator Carl Levin or his Democratic counterparts chairing other Senate committees will be holding hearings on any time soon.
I assume that Whitacre got paid by the Wall Street Journal for his fraudulent column and that the funds were paid over to General Motors. The GM advertisement below commits the same fraud as Whitacre committed in his Journal column, but this one is committed by Whitacre at GM’s expense, underwritten by taxpayers. Someone in a position of authority really ought to investigate this.
Via Matthew Continetti/The Blog.
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