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GE to pay $50 million to settle accounting allegations

The SEC says the company bent the rules to make its financial results appear more attractive to investors.

August 05, 2009|Associated Press

WASHINGTON — General Electric Co. will pay a $50-million civil penalty to settle charges by the Securities and Exchange Commission accusing the conglomerate of improper accounting to make its financial results appear more attractive to investors.

The SEC said Tuesday that GE violated U.S. securities laws four times in 2002 and 2003 when accounting for such items as commercial paper funding and the sale of train locomotives and aircraft engine spare parts.

The SEC said the changes helped GE maintain a string of earnings that beat Wall Street expectations each quarter from 1995 through 2004.

"GE bent the accounting rules beyond the breaking point," Robert Khuzami, head of the SEC's enforcement division, said in a statement.

Fairfield, Conn.-based GE doesn't admit or deny the allegations, but said in a statement that it corrected its financial statements during SEC filings made from 2005 to 2008.

GE said that two of the violations outlined by the SEC were intentional but that the other two were errors of negligence by company officials.

An unspecified number of employees working on the locomotive transactions were fired, and GE has implemented new internal accounting controls, according to a GE spokeswoman. "The errors at issue fell short of our standards," GE said in a statement.

The SEC did not quantify how much GE gained through the accounting tactics, but the company said there was a $280-million cumulative reduction of its net earnings between 2001 and 2007 when it went back to correct the problems. GE said it turned over 2.9 million pages of documents and spent $200 million in legal and accounting fees over the more than four-year investigation into its accounting practices.

Shares of GE rose 10 cents to close at $13.82.

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