General Electric Co. was fined $200 million for allegedly misleading investors about the finances of its gas-power unit and a run-off insurance business, settling a long-standing U.S. accounting probe that has weighed on the company.
GE failed to explain to shareholders that a sizable portion of its power earnings in 2016 and 2017 stemmed from reductions in prior cost estimates, the Securities and Exchange Commission said in a statement Wednesday. The SEC also said 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.
GE also lowered projected claims costs in its long-term care insurance portfolio from 2015 to 2017, while failing to disclose corresponding uncertainties on future liabilities, the SEC said.
“Investors are entitled to an accurate picture of a company’s material operating results,” SEC Enforcement Director Stephanie Avakian said in the statement. “GE’s repeated disclosure failures across multiple businesses materially misled investors about how it was generating reported earnings and cash growth.”
As part of the settlement, GE agreed to report to the SEC for a year on compliance issues related to its power business and run-off insurance operations. The company didn’t admit or deny the SEC’s findings.
“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,” the Boston-based company said in a regulatory filing.
