> If it turns out they were wrong they'll still be able to make money on the short, buy back in with the profits and then when the stocks rebound they cash in again.
It's simple: GE is down, as of right now, over 11%. Knowing the sensational allegations of the report would have a short-term deleterious effect, they shorted the stock. They can turn the profit from the successful short around into buying GE at its depressed price, and profit a second time when the stock returns to normal levels after the report is found to be exaggerated.
This assumes the report is, in fact, exaggerated.