US regulators may take action against GE
NEW YORK, Oct 7, (AP): Federal regulators may take action against General Electric for possible violations of securities laws, the company said Tuesday, signaling a new phase in ongoing federal investigations into the company’s accounting practices.
In a federal filing, GE revealed it received a notice Sept. 30 that said staff at the Securities and Exchange Commission may recommend that the commission bring a civil injunctive action for possible violations of securities laws.
The issues relate to GE’s troubled Capital business and include possible problems with disclosures about its insurance operations and premium deficiency testing.
“GE has fully cooperated with the SEC’s investigation related to past reserve practices at our run-off insurance subsidiary, as we have disclosed since 2018,” the company said in an emailed statement. “We strongly disagree with the recommendation of the SEC staff.”
GE is the subject of several federal investigations. The SEC has been looking into the company’s $22 billion writedown of its power division, which was disclosed two years ago. The company has said that charge was related to GE’s acquisition of Alstom, a French power and grid business that GE acquired just before the gas turbine market peaked.
The SEC also has been investigating how GE took a $15 billion hit after a subsidiary, North American Life & Health, miscalculated the cost for the care of people who lived longer than projected. The notice indicates the investigations have reached a new phase, and “hopefully, eventually, these things get resolved,” said Deane Dray, managing director at RBC Capital Markets.
The SEC investigations pre-date GE’s current CEO, Larry Culp, who took the helm in 2019 after John Flannery was ousted from the role.
Since Culp took over as CEO, “they’ve made all kinds of strides in making the accounting far more transparent,” Dray said. The Justice Department also has investigated GE over its accounting practices. After one of the probes, the company agreed to pay a civil penalty of $1.5 billion in 2019 for alleged misrepresentations about subprime loans included in residential mortgage-backed securities.