NEW YORK (CNN/Money) - General Electric Co. stock plunged Thursday, driven down by prominent money manager Bill Gross' questions about the company's credit -- and credibility.

GE (GE: down $1.35 to $37.45, Research, Estimates) shares fell nearly 3.5 percent after Gross, manager of PIMCO Total Return, the world's largest bond fund, said in a note published late Wednesday on the PIMCO Web site that GE CEO Jeffrey Immelt and his predecessor, the legendary Jack Welch, have misled investors about the company's ability to grow its earnings at a rate of about 15 percent per year for "several decades."

"It grows earnings not so much by the brilliance of management or the diversity of their operations, as Welch and Immelt claim, but through the acquisition of companies -- more than 100 companies in each of the last five years -- using high-powered, high [price/earnings] multiple GE stock or cheap near-Treasury Bill-yielding commercial paper," Gross said.

But GE's commercial paper, which is of a shorter term and a lower interest rate than other debt, is three times as large as the bank lines that are supposed to be backing up the debt, Gross said, a situation that arose because GE's high "Aaa" credit rating gives it the appearance of rock-solid credit-worthiness.

"Normally companies that borrow in the [commercial paper] market are required to have bank lines at least equal to their commercial paper, but GE Capital has been allowed to accumulate $50 billion of unbacked [commercial paper] because of the lack of market discipline," Gross said.

As a result, Gross said, his fund won't be buying any GE commercial paper "for the foreseeable future."

GE issued a press release after the market closed on Thursday to address the debt concerns. The company said it is in the process of increasing its bank backup lines from $33.5 billion to $50 billion as well as reducing its percentage of commercial paper to total debt. In addition, GE reaffirmed its 2002 earnings per share target of $1.65 to $1.67.

Speaking to CNNfn's Street Sweep program, Gross said he didn't intend to pick on GE or hurt its stock price. Rather, he saw GE as a "lightning rod," indicative of a widespread problem in corporate accountability.

"There's nothing really wrong with [some of the things GE has done]," Gross said. "It's to the advantage of a company to borrow cheaply and sell stock at a high P/E ratio. That's what companies can do to assist in growing earnings."

"I would like GE and other companies to be more candid in terms of disclosing exactly how they do these things," Gross added. "If they grow earnings, then let's hear about it and find out how much comes from those types of maneuvers."

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In his earlier note, Gross compared GE, the world's largest company in terms of market capitalization, to Berkshire Hathaway Group, the financing firm run by another business legend, Warren Buffett. But he found GE sorely lacking in comparison.

"The fact is that GE is a conglomerate financed by a money machine -- its subsidiary GE Capital -- but, unlike Berkshire Hathaway, its foundation is vulnerable because its survival depends upon the confidence of outside investors," Gross said, confidence that has recently been shaken by the collapse of Enron Corp. and a host of other accounting scandals that have rocked the business world in recent months.

GE Capital, the investment arm of GE, sold $11 billion in global bonds last week, the second-biggest U.S. issue ever. At the time, spokeswoman Marisa Moretti said the debt offer was made because interest rates were at "historic lows." In his note, Gross singled out Moretti for criticism, saying her comments were meant to disguise a better reason for the debt offering -- that GE was worried about its position in the commercial paper market.

"What Ms. Moretti was trying to mask, I believe, was that the commercial paper market is quite sensitive these days and is drying up for some heretofore stellar corporate credits that are then required to fund in the longer-term credit markets," Gross said. "Honest Abeline, [Moretti] is not."

Shares of the Fairfield, Conn.-based conglomerate, whose operations include financial services, aerospace and NBC television, were also battered Wednesday by a published report that GE planned to acquire CIT Group, the commercial finance unit of troubled manufacturer Tyco International Ltd. (TYC: down $0.94 to $33.35, Research, Estimates) GE denied interest in buying the business.