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GE may now be wishing it could take back a string of stock buybacks.

One of the charges leveled by accounting sleuth Harry Markopolos in his explosive report, “General Electric: A Bigger Fraud Than Enron,” is that GE was buying back tons of stock with cash desperately needed to sustain its failing long-term care business.

Markopolos charges that GE needs $18.5 billion in cash to pay future claims owed policy holders in nursing homes and assisted living, and another $10.5 billion to offset a pending write-down on its long-term care business. That $29 billion shortfall is rapidly deepening, Markopolos asserts, and he predicts it will drive the jet engine and turbine producer into bankruptcy.

GE strongly disputes Markopolos’ accusations, claiming that its reserves are adequate to cover future claims. Markopolos has said that he is working with an undisclosed hedge fund that’s shorting GE stock, and that he’s getting a share of the profits.

The debate is one of the most compelling in Corporate America, pitting the whistleblower who nailed Bernie Madoff against a prestigious board and a highly respected CEO, Larry Culp, who built industrial conglomerate Danaher into a colossus while the field’s one-time champion, GE, was collapsing. Determining who’s right hinges on arcane issues that the GE leadership claims it’s fully mastered, and that Markopolos swears they don’t remotely comprehend.

But even if Markopolos’ estimate of a $29 billion deficit, with a lot more to come, is too high, or even bogus, he’s right about one big issue. GE was spending vast sums on share buybacks that should have been backing its flailing, highly unpredictable long-term care franchise. Besides, GE wasted billions by buying all of those shares at inflated prices. Wall Street cheered the buybacks, and GE complied with relish, running one of the most value-destroying repurchase programs in the annals of corporate America.

From 2008 to 2012, GE spent $12.2 billion to redeem 583 million shares at an average price of $21. The buybacks accelerated from 2013 to 2015, when it paid $15.6 billion for 616 million shares ($25.32 per share), and took another jump in 2016 through 2017, when it paid even more––$29.76 on average––for the biggest chunk yet, 874 million shares.

All told, over the decade ended at the close of 2017, GE spent $53.9 billion to repurchase 2.07 billion shares, at average prices of $26. At today’s $8.38, GE could buy the same number of shares for less than one-third that amount, or $17.4 billion. Hence, GE has wasted a staggering $36.5 billion overpaying for its overpriced stock. That amount, what investigative accountant Albert Meyer calls “destruction of capital,” is equivalent to half of GE’s current market cap of $71 billion. To make matters worse, repurchasing 2.07 billion shares has lowered the share count by 1.9 billion shares or 8% less than that over the decade. The reason: GE made large options grants to its top managers over those years that eventually vested, requiring the company to issue new shares that diluted its stock.

By 2018, GE’s cash position became so precarious that management ended buybacks. Early that year, GE took a surprise charge of $15 billion replenish its reserves for long-term care insurance, the culmination of failing to provide an adequate cushion for the previous fourteen years. GE clearly should have been conserving money to cover insurance claims instead of pandering to Wall Street.

Fortune informed a GE spokesperson about the numbers in this story, and our assertion that GE’s buyback policy was misguided. The spokesperson pointed to recent comments by Culp and board member Leslie Seidman, the former chief of the Financial Accounting Standards Board, stating that they’re focused on GE’s promising future, not the past. At the Bernstein Strategic Decisions conference in early June, Culp stated, “Our first priority this year…is really putting the company on a firmer financial footing.”

But what if Markopolos is right, and the additional hole in reserves amounts to $29 billion? If GE had foregone buybacks, the almost $54 billion it would have saved could have covered the 2018 charge, plus the current shortfall, with $10 billion left over. Had GE conserved cash, it would be on a much stronger footing than its current wobbling stagger. Splurging on buybacks when a business as dangerous and unpredictable as long-term care needs all the support it can get is the definition of managerial lunacy. That’s the old GE. We’ll soon see if the vaunted new leadership really has the firm grasp on the controls—or has no idea what terrain lies ahead.

‘Destruction of Capital’: How GE’s Decade of Stock Buybacks May Come Back to Haunt the Company

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