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U.S. Securities and Exchange Commission


Litigation Release No. 21166 / August 4, 2009

Accounting and Auditing Enforcement Release No. 3029 / August 4, 2009

Securities and Exchange Commission v. General Electric Company, 3:09 CV 1235 (RNC) (D. Conn.)


The Commission today filed a civil injunctive action alleging civil fraud and other charges against General Electric Company ("GE"), a diversified technology, manufacturing, media, and financial services company with headquarters in Fairfield, Connecticut. The suit, filed in U.S. District Court for the District of Connecticut, alleges that GE misled investors by reporting materially false and misleading results in its financial statements. The SEC alleges that GE used improper accounting methods to increase its reported earnings or revenues and avoid reporting negative financial results. GE has agreed to pay a $50 million penalty to settle the SEC's charges.

According to the Commission's complaint, GE met or exceeded final consensus analyst earnings per share (EPS) expectations every quarter from 1995 through filing of its 2004 annual report. However, on four separate occasions in 2002 and 2003, high-level GE accounting executives or other finance personnel approved accounting that was not in compliance with Generally Accepted Accounting Principles ("GAAP"). In one instance, the improper accounting allowed GE to avoid missing analysts' final consensus EPS expectations. The four accounting violations were (1) beginning in January 2003, an improper application of the accounting standards to GE's commercial paper funding program to avoid unfavorable disclosures and an estimated approximately $200 million pre-tax charge to earnings; (2) a 2003 failure to correct a misapplication of financial accounting standards to certain GE interest-rate swaps; (3) in 2002 and 2003, reported end-of-year sales of locomotives that had not yet occurred in order to accelerate more than $370 million in revenue; and (4) in 2002, an improper change to GE's accounting for sales of commercial aircraft engines' spare parts that increased GE's 2002 net earnings by $585 million.

Without admitting or denying the SEC's allegations, GE agreed to the financial penalty and consented to the entry of an order permanently enjoining it from violating Section 17(a) of the Securities Act of 1933 ("Securities Act") and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. The charges announced today conclude the SEC's investigation with respect to the company.

SEC Complaint



Modified: 08/04/2009