Great Sage of the Sea
Posts: 602
Location: Visalia, Ca. | Subject: RE: NON/SUB
I do. And I disagree with your characterization of the company's management and the actions at issue here.
There is a large difference between 'cooking the books" ala Bernie Madoff or Enron, and "aggressive accounting practices" and "improper accounting decisions". They did NOT pay the accountants $200 million to "cook the books", as you allege.
I also note that the violations occurred in 2002 and 2003, and that the company corrected its SEC filings between 2005 and 2008. Except for the SEC lawsuit, these are not recent actions. In fact, one has to wonder why it took the SEC from 2005, when the first restatements were made, until now to bring a legal action.
With over 10 billion common shares outstanding, a $50 million fine amounts to about $0.0002 per share. Not going to affect the next dividend payment. And the stock price is UP $0.25 today.
Here is the story, from Dow Jones, via my brokerage:
UPDATE: SEC Files Civil Fraud Charges Against General Electric
Source: DJ
Date: 08/04/09
08/04 14:13 DJ CORRECT:UPDATE: SEC Files Civil Fraud Charges Against General Electric
("=UPDATE: SEC Files Civil Fraud Charges Against General Electric," at 11:30 a.m. EDT, misstated what the SEC said was one result of the accounting changes, in the fifth paragraph. The correct version follows)
By Sarah N. Lynch
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--General Electric Company (GE) has agreed to pay $50 million to settle civil charges it misled investors in its financial statements, federal regulators said Tuesday.
The charges, filed by the U.S. Securities and Exchange Commission, claim GE used improper accounting methods to increase its reported earnings or revenues and avoid reporting negative financial results. GE will pay the $50 million penalty without admitting or denying the allegations.
"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," GE announced in a statement. "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."
The SEC's case, filed in a Connecticut-based federal court, said GE made " improper accounting decisions" on four different occasions in 2002 and 2003, which led to making materially false or misleading financial statements.
The lawsuit alleges high-level company executives approved accounting practices that were not in compliance with accepted standards. In one instance, those accounting changes allowed GE to avoid missing analysts' final consensus on the company's expected earnings per share, the SEC said.
"GE bent the accounting rules beyond the breaking point," said Robert Khuzami, the director of the SEC's Division of Enforcement. "Overly aggressive accounting can distort a company's true financial condition and mislead investors."
The SEC said the first accounting violation occurred in 2003 when standards were improperly applied to the company's now-discontinued commercial paper funding program to avoid unfavorable disclosures and an estimated $200 million pre-tax charge on its earnings.
Other accounting errors occurred after standards were wrongfully applied to certain interest-rate swaps, end-of-year sales, of locomotives that had not yet occurred and the sales of commercial aircraft engines' spare parts. Accounting standards applied to the sale of the engine spare parts inflated GE's 2002 net earnings by $585 million, the SEC said.
GE said Tuesday it had previously corrected these issues in filings made with the SEC between May 2005 and February 2008, and it does not need to make any additional corrections.
-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634; sarah.lynch@ dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/nae/al?rnd=NEQpysjVnESC%2BGfnLGdDUw%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
08-04-09 1413ET
Edited by Donald L. Johnson 2009-08-06 11:47 AM
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NON/SUB
