General Electric Co. insiders were convinced: There must be a mole. How else did Stephen Tusa know?
With the conglomerate in crisis, the JPMorgan Chase & Co. research analyst had an uncanny knack, time and again, for uncovering deep problems before they were public. For years, his research had zeroed in on issues both broad, like management credibility, and detailed, like a flawed fan blade inside GE’s turbines, that kept proving prescient.
His reports, often lengthy and skeptical, warned JPMorgan clients to dump the stock, and seemed to be gaining more influence with each new volume.
Inside GE and its boardroom, as a succession of management teams tried to wrap their arms around problems that kept spooking investors, Mr. Tusa’s calls became a source of speculation.
The board and advisers would scrutinize Mr. Tusa’s reports. GE even launched a hunt for leakers, a board member questioned JPMorgan about the research and the bank conducted an internal review, people familiar with the matter said.
As General Electric ’s profits and stock price shriveled, erasing some $200 billion of market value in 2017 and 2018, Mr. Tusa’s dour attitude won more influence among investors. One former senior GE executive said Mr. Tusa’s reports were painful to read, but were thorough and largely correct. “I tip my hat,” this executive said. “At the end of the day, our problem is not Steve Tusa.”
It seems that every decade Wall Street anoints another star analyst. There was Mary Meeker and her coverage of internet stocks during the 1990s dot-com bubble. More recently, Meredith Whitney gained fame for her warnings on Citigroup and other banks during the 2008 financial crisis. Today, few analysts can claim the name recognition and influence that 44-year-old Mr. Tusa has built around GE.
Wall Street research has long come under fire over perceptions of cozy relationships with companies, especially when it comes to big investment-banking clients like GE. Mr. Tusa has been an outlier—which he’s quick to point out—and moved the stock in the process.
Over the past two years, Mr. Tusa has cut his price target on GE 10 times, to $5 from $27. Each time he’s done so, the stock has underperformed the S&P 500 that day, by an average of more than 3 percentage points. When he upgraded the stock last December to a lukewarm “neutral,” the stock rallied 7%, as people hoped he was calling the bottom.
That hope was short-lived. Before U.S. markets opened April 8, JPMorgan issued an alert that Mr. Tusa was downgrading GE again. The report—over 100 pages—highlighted GE’s challenges and risks but the thrust was that the stock price had gotten ahead of reality. GE’s stock slid 5% as the broader market rose.
With the stock beaten up and Mr. Tusa remaining negative, his opinion remains at odds with new GE leaders who are promising a long turnaround. Some people who credit the analyst for correctly seeing the decline of the company are beginning to question if he’s too committed to his negative view.
The bearish turn on GE was a decade in the making.
As an analyst, Mr. Tusa has followed GE since 2001. A formative event was when another conglomerate, Tyco International Ltd. , collapsed under the weight of an accounting fraud in 2002. The scheme was missed by analysts, and it taught Mr. Tusa to have a healthy skepticism around the companies he covered, according to a person close to the analyst.
In those years, GE struggled to find the regular growth delivered in the decade before. It spent billions of dollars on acquisitions and share repurchases, and continued its reliance on the financial-services business that would almost destroy the entire company in the financial crisis.
In 2008, Mr. Tusa’s downgrade to “neutral” eerily described the internal problems that would contribute to GE’s collapse a decade later. “It would appear as though accountability for hitting targets is the top priority, and some managers might be chasing earnings,” he wrote. “We also think the high bar for success in such a competitive environment could create a scenario in which bad news is not tolerated, making necessary communication with senior level managers a challenge until it’s too late to fix.”
Studies have found analysts to be more positive when they are issuing opinions on larger companies, when they cover many companies, and when the companies generate high-investment banking fees. Mr. Tusa has managed to buck all those trends, said Mark A. Chen, a finance professor at Georgia State University who has studied the investment-research industry.
Mr. Tusa covers 21 industrial companies and JPMorgan has collected an estimated $370 million in banking fees from GE since 2010, according to Dealogic, the most the conglomerate has paid to any investment bank over that period.
Prof. Chen found those biases are so prevalent that investors have baked them into their reactions: A negative call, like Mr. Tusa’s, by an analyst under those circumstances tends to move the stock more. “Clearly this analyst broke the mold in analyst optimism,” Prof. Chen said.
A prime example: In 2015, as JPMorgan’s bankers advised the conglomerate on selling much of its financial-services business, Mr. Tusa had to halt publishing but he continued to do research. Upon returning in May 2016, he surprised investors with an “underweight” rating, JPMorgan’s version of a “sell” rating.
At the time, GE’s problems hadn’t yet emerged and the stock was trading close to $30. In the two years that followed, GE slashed its dividend twice, changed its CEO twice and decided to break itself apart, selling off major units. Shares trade around $10 today.
Despite the success of his “underweight” call, Mr. Tusa was constantly questioning the rating in the first year when the stock stayed near $30, said people close to the analyst.
“He had a lot of nervousness around that,” said Paul DeGaetano, CEO of a cosmetics company, who has known Mr. Tusa since they played ice hockey three decades ago. Friends and acquaintances in the finance industry criticized his aggressive stance in that first year. “It doesn’t surprise me that he would be the ringleader of this sort of thing,” he said.
Charles Stephen Tusa Jr. grew up in Greenwich, Conn., one of the country’s wealthiest towns, home to hedge-fund managers and private-equity partners. As a child, he used to ride bikes with Ian and Shep Murray, who went on to found preppy clothier Vineyard Vines. He attended the elite Brunswick School, following the footsteps of his father Charlie, a founding partner of a prominent law firm in town.
A political science major at Dickinson College in Pennsylvania, Mr. Tusa has said he learned finance on the job after joining JPMorgan in 1998. It wasn’t his first career choice. His dream was to play center for the New York Rangers and Wall Street hasn’t tamed his devotion to ice hockey. In 2014, as the Rangers were making a run in the playoffs, Mr. Tusa grew a mullet. He still laces up his skates regularly with multiple leagues, getting in more than 20 games over the winter. On days when GE is dropping major news, he has worked from the bench.
At GE, there has long been a suspicion that Mr. Tusa had a network of contacts inside the company that fed him information, according to former executives and people familiar with the board. The detailed knowledge of the company in his research notes was seen by some as being suspiciously accurate.
GE conducted a search for leaks and Ed Garden, a GE director and co-founder of activist investor Trian Fund Management, discussed the issue with JPMorgan, according to people familiar with the matter. JPMorgan executives reviewed Mr. Tusa’s work and found nothing the bank was concerned about, the people said.
In looking for leaks, no one was above suspicion, even board members were commanded to keep their mouths shut, the people said, and GE took extra steps to keep any developments under wraps.
Special counsel Robert S. Mueller III asked the House Intelligence Committee on Friday for an official transcript of Trump adviser Roger Stone’s testimony, according to people familiar with the request, a sign that prosecutors could be moving to charge him with a crime.
.. Securing an official transcript from the committee would be a necessary step before pursuing an indictment that Stone allegedly lied to lawmakers, legal experts said.
.. The special counsel could use the threat of a false-statement charge to seek cooperation from Stone, as Mueller has done with other Trump advisers, such as former national security adviser Michael Flynn and longtime Trump lawyer Michael Cohen... For weeks, the special counsel’s office has had access to an unofficial copy of Stone’s closed-door September 2017 interview, according to people with knowledge of the process. Mueller’s request of the official copy signals the special counsel could now be pursuing an indictment, several legal experts said... Stone accused House Democrats of “attempting to play frivolous word games, and hairsplitting about semantics over nonmaterial matters.”
Stone added: “Where is the evidence of Russian collusion or WikiLeaks collaboration?”
.. Stone, who boasted during the race that he was in touch with WikiLeaks founder Julian Assange, has said since that his past comments were exaggerated or misunderstood. Both he and WikiLeaks have adamantly denied they were in contact.
.. As part of that review, ODNI shares copies of the transcripts with other agencies, including the special counsel’s office, that might have an interest in protecting information in the interviews, officials said.
However, because the Stone interview was conducted in executive session, the transcript officially belongs to the committee and may not be released unless authorized by the committee, according to its rules.
.. Stone released written testimony he provided the House Intelligence Committee before his September 2017 interview, in which he wrote that he had no “advanced knowledge of the source or actual content of the WikiLeaks disclosures regarding Hillary Clinton.”
.. He told the panel that he based some of his predictions on public information and tips from associates. He also said that he had an intermediary who provided him with information about WikiLeaks — but refused to name the person, indicating the person was a journalist with whom he had spoken off the record.
.. Shortly after his closed-door appearance, Stone wrote a letter to the committee saying he learned about WikiLeaks’s planned release from Randy Credico, a New York comedian who had interviewed Assange and is a longtime friend of New York attorney Margaret Ratner Kunstler, who has represented WikiLeaks.
Credico has repeatedly denied passing any information from WikiLeaks to Stone. He said he may have speculated about the group’s tactics with Stone.
.. Stone has released numerous text messages that he says prove he was relying on Credico for information about the upcoming Wikileaks release of material damaging to Hillary Clinton’s campaign. In one of them Credico, who boasts of being best friends with Assange’s attorney, asserts that the Wikileaks founder will make an announcement soon. In another the comic writes: “Hillary’s campaign will die this week.”
.. In recent weeks, Mueller’s prosecutors have been focused on another Stone associate who alerted him to an upcoming WikiLeaks release in 2016: conservative writer Jerome Corsi.
In an Aug. 2, 2016, email, Corsi wrote to Stone that the group planned to disclose emails that October that would embarrass Clinton, according to charging documents drafted by Mueller’s team and provided to The Washington Post.
.. “Word is friend in embassy plans 2 more dumps,” Corsi wrote in the email quoted in the draft document, referring to Assange, who has been living in the Ecuadoran Embassy in London since 2012. “One shortly after I’m back. 2nd in Oct. Impact planned to be very damaging.”
.. Corsi, who rejected a plea offer from the special counsel, said the email was based on his speculation of what WikiLeaks might be planning, not any inside knowledge.
.. The day after receiving the message from Corsi, Stone has said, he spoke with Trump by phone.
.. Stone has said he never discussed WikiLeaks or hacked emails with Trump. “Unless Mueller has tape recordings of the phone calls, what would that prove?” he told The Post last month.
.. “The emails prove nothing,” Stone added, “other than like every other politico and political reporter in America, I was curious to know what it was that WikiLeaks had.”
.. Over the past several months, Mueller’s investigators have interviewed a dozen Stone friends and associates, focusing on individuals who discussed WikiLeaks with Stone before to the election. Some have provided testimony and records that contradict Stone’s claims.
.. Charles Ortel, a Wall Street analyst and conservative writer, told The Post that he was interviewed in New York last week by two FBI agents who asked about his 2016 contacts with Stone, Corsi and Credico.
Ortel said the agents were interested in an email from then-Fox News reporter James Rosen that Ortel forwarded to Stone on July 25, 2016. In it, Rosen wrote, “Am told WikiLeaks will be doing a massive dump of HRC emails relating to the CF in September,” referring to Clinton and her family foundation.
Ortel declined to disclose the full details of his FBI interview but told The Post that he did not know where Rosen had gotten his information about WikiLeaks’s plans.
Rosen, who no longer works at Fox News, has repeatedly declined to comment.
.. In written questions posed to the president earlier this year, Mueller sought information from Trump about his interactions with Stone and whether they discussed WikiLeaks.
According to people familiar with Trump’s responses, the president said he had no prior knowledge of what the group was going to do and that Stone did not tell him about WikiLeaks’s plans.
.. In recent days, however, Trump attorney Rudolph W. Giuliani was less definitive.
“Did Roger Stone ever give the president a heads-up on WikiLeaks’s leaks concerning Hillary Clinton and the DNC?” ABC News’s George Stephanopoulos asked him Sunday.
“No, I don’t believe so,” Giuliani said. “But again, if Roger Stone gave anybody a heads-up about WikiLeaks’s leaks, that’s not a crime . . . collusion is not a crime.”