GE Announces SEC Settlement of 2002 & 2003 Accounting Issues
FAIRFIELD, Conn.--(BUSINESS WIRE)--General Electric Company today announced that it had reached a settlement with the United States Securities and Exchange Commission (SEC), without admitting or denying allegations of any wrongdoing, which concludes the SEC’s investigation of accounting issues at GE. This settlement relates to four accounting matters in 2002 and 2003: the application of SFAS 133 to GE’s since-discontinued commercial paper hedging program and, separately, to certain swap derivatives where fees were paid or received at inception; a change in accounting for profits on spare parts in the commercial aviation engine business; and certain year-end transactions in the Rail business. GE has previously corrected for the effects of these matters in its financial statements in SEC filings made between May 2005 and February 2008. No further corrections are required. Under the terms of the settlement, the Company consented to the entry of a judgment requiring it to pay a civil penalty of $50 million and to comply with the federal securities laws.
The complaint alleges two of these errors, those relating to commercial paper hedging and Rail transactions, were intentional violations of the anti-fraud provisions of the securities laws, and the remaining two errors were negligent violations of the securities laws.
GE issued the following statement regarding the settlement:
“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.”
In settling this matter, the SEC has acknowledged the efforts made by GE’s Audit Committee and senior management to address the issues arising during the course of this investigation and to implement appropriate remedial measures and control enhancements.
GE (NYSE: GE) is a diversified infrastructure, finance and media company taking on the world’s toughest challenges. From aircraft engines and power generation to financial services, medical imaging, and television programming, GE operates in more than 100 countries and employs about 300,000 people worldwide. For more information, visit the company's Web site at www.ge.com.