SEC charges GE with fraud, reaching $50 million settlement

[JURIST] The US Securities and Exchange Commission (SEC) [official website] filed fraud charges [complaint, PDF] Tuesday against General Electric Co. (GE) [corporate website], resulting in GE agreeing to pay a $50 million settlement [press release]. The SEC accused GE of misleading investors in 2003 and 2003 by reporting false and misleading information in its financial statements. GE accounting executives allegedly approved accounting that did not comply with generally accepted accounting principles on four separate occasions. GE did not admit or deny the SEC's allegations, but agreed to pay $50 million and refrain from violating federal securities law. In a statement [text], GE said:


GE is committed to the highest standards of accounting. GE cooperated with the SEC over the course of its investigation, and GE and its Audit Committee conducted their own comprehensive review in conjunction with the investigation. The Company reviewed and produced approximately 2.9 million pages of e-mails and other documents to the SEC and incurred approximately $200 million in external legal and accounting expenses to ensure that all issues were addressed appropriately. We have concluded that it is in the best interests of GE and its shareholders to resolve this matter and put it behind us on the basis announced today, pursuant to which, consistent with standard SEC practice, we neither admit nor deny the SEC's allegations. 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, as previously described in our SEC filings, including measures to strengthen our controllership and technical accounting resources and capabilities.

Earlier this week, the SEC charged [JURIST report] Bank of America (BOA) [corporate website] with misleading investors [complaint, PDF] regarding billions of dollars paid to Merrill Lynch [corporate website] executives during the acquisition of the firm. Like GE, BOA neither admitted nor denied the allegations, but agreed to settle for $33 million. In June, the SEC charged [complaint, PDF; JURIST report] former Countrywide Financial Corporation officials with securities fraud arising from misleading investors about credit risks involved in the company's efforts to build and maintain their market share. Countrywide was acquired by BOA in July 2008, making the bank the nation's leading mortgage originator.

 

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