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UPDATE 1-GE shares fall on report that cash situation worse than thought

(Adds details from the report)

Aug 15 (Reuters) - General Electric shares fell 5% on Thursday after Harry Markopolos, whistleblower in the Bernard Madoff Ponzi scheme case, alleged that company financial filings masked the depths of its problems.

Markopolos, in a research report, accused GE of hiding $38.1 billion in potential losses and claimed that the company's cash situation was far worse than disclosed in its the latest annual regulatory filing.

"GE's true debt to equity ratio is 17:1, not 3:1, which will undermine its credit status," said Markopolos, adding that the company's liquidity situation was "more serious than either the Enron or WorldCom accounting frauds."

In response to the report, GE said it "stands behind its financials" and operates to the "highest-level of integrity" in its financial reporting.

GE said in its statement that Markopolos is known to work for unnamed hedge funds that typically benefit from short selling a company's stock.

"We remain focused on running our business every day and ... will not be distracted by this type of meritless, misguided and self-serving speculation," the company said in a statement.

A disclaimer in the report stated that it was drafted by Forensic Decisions PR LLC, which will get compensation from a third-party entity that could benefit from a decline in GE's share price. The report did not name the entity.

GE shares were down 4.3% at $8.64 in premarket trading. (Reporting by Ankit Ajmera in Bengaluru Editing by Saumyadeb Chakrabarty)