GE settles $50m fraud charges
SEC alleges that GE misled investors
US infrastructure and media company General Electric (GE) has paid out $50m
(£29m) to settle charges of accounting fraud brought by the US financial
regulator.
The Securities and Exchange Commission accused GE of misleading investors by
‘reporting materially false and misleading results in its financial statements’.
GE itself released a statement announcing the case had been settled, ‘without
admitting or denying allegations of any wrongdoing’.
Robert Khuzami, director of the SEC’s division of enforcement, however, said
GE used improper accounting methods to increase its reported earnings or
revenues and avoid reporting negative financial results.
‘GE bent the accounting rules beyond the breaking point,’ he said.
‘Overly aggressive accounting can distort a company’s true financial
condition and mislead investors.’
The SEC said it uncovered four accounting violations which took place between
2002 and 2003 and included:
– an improper application of the accounting standards to GE’s commercial
paper funding program to avoid unfavorable disclosures and an estimated
approximately $200m (£118m) pre-tax charge to earnings;
– A 2003 failure to correct a misapplication of financial accounting
standards to certain GE interest-rate swaps;
– a reported end-of-year sales of locomotives that had not yet occurred in
order to accelerate more than $370m (£218m) in revenue; and
– an improper change to GE’s accounting for sales of commercial aircraft
engines spare parts that increased GE’s 2002 net earnings by $585m (£344m).
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In a statement GE said it was in the best interests of GE and shareholders to
‘resolve this matter and put it behind us’.
‘The errors at issue fell short of our standards, and we have implemented
numerous remedial actions and internal control enhancements to prevent such
errors from recurring… including measures to strengthen our controllership and
technical accounting resources and capabilities.’
Read the full SEC statement:
SEC
Charges General Electric With Accounting Fraud
Read the full GE statement:
GE
Announces SEC Settlement of 2002 & 2003 Accounting Issues