GE to Pay $200 Million Fine to Settle Charges for Disclosure Failures in Power and Insurance Businesses
Posted on 12/11/2020
The Securities and Exchange Commission announced that General Electric Co. (GE) has agreed to pay a US$ 200 million penalty to settle charges for disclosure failures in its power and insurance businesses. In 2017 and 2018, GE’s stock price fell almost 75% as challenges in its power and insurance businesses were disclosed to the public. GE was forced to dismantle its massive business empire to pay down debts. GE shocked investors in January 2018 by reporting a US$ 6.2 billion loss in its portfolio of long-term care insurance.
The press release states, “According to the SEC’s order, GE misled investors by describing its GE Power profits without explaining that one-quarter of profits in 2016 and nearly half in the first three quarters of 2017 stemmed from reductions in its prior cost estimates. The order also finds that GE failed to tell investors that its reported increase in current industrial cash collections was coming at the expense of cash in future years and came primarily from internal receivable sales between GE Power and GE’s financial services business, GE Capital. In addition, the order finds that from 2015 to 2017, GE lowered projected costs for claims against its long-term care insurance portfolio and failed to inform investors of the corresponding uncertainties resulting from lower estimates of future insurance liabilities at a time of rising costs from long-term health insurance claims.”
SEC adds, “The SEC’s order finds that GE violated the antifraud, reporting, disclosure controls, and accounting controls provisions of the securities laws. Without admitting or denying the order’s findings, GE agreed to cease and desist from future violations of the charged provisions, pay a $200 million penalty, and report for a one-year period to the SEC regarding certain accounting and disclosure controls in its insurance and power businesses.”