General Motors chairman and chief executive officer Edward Whitacre took to the pages of the Wall Street Journal last month 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, the investor might well 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 had 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 and probably at the urging of the Obama administration. It was not, in short, the kind of fraud that congressional Democrats will be holding hearings on any time soon.
GM also produced an advertisement starring Whitacre and committing the same fraud that Whitacre had perpetrated in his Journal column. Some inspired soul has finally gotten Whitacre to spill the beans on GM’s subsistence at taxpayers’ expense. It can’t have been easy to have gotten the truth out of this character or his masters in the Obama administration.
Via Weekly Standard/The Blog.
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