Larry Culp, CEO of General Electric
Scott Mlyn | CNBC
The Securities and Exchange Commission has fined General Electric $ 200 million for paying fees for misleading investors related to its power and insurance businesses.
The SEC found that GE misled investors in 2016 and 2017 about the source of profit in its GE Power business, one of the company's core businesses. The company also did not fully inform investors between 2015 and 2017 about the risks associated with GE Capital, its financial services arm, according to the SEC.
The settlement concludes the SEC's longstanding investigation into bad business practices among the conglomerate's former leadership team. Under CEO Larry Culp, executives are now trying to stage a comeback after years of decline. The company that made a name for itself selling lightbulbs now makes everything from large appliances to aircraft parts and medical equipment. It also has power, digital and financial weapons.
"Investors are entitled to an accurate picture of a company's key operating results," said Stephanie Avakian, director of the SEC's enforcement division, in a statement. "GE's repeated disclosure errors in several businesses have misled investors as to how they generated the reported earnings and cash growth and latent risks in the insurance business."
GE shares fell nearly 75% in 2017 and 2018 when the data was released, the SEC said. The company has settled the charges and agreed to pay the civil penalty without admitting or disapproving the results, the SEC said.
Avakian said on a conference call with reporters that GE "has not released material information about how it made more than $ 1 billion in reported electricity earnings in two separate years." She added that the company preferred cash receipts of $ 2.5 billion due in five years "by selling receivables to another GE subsidiary."
"Even at a high level, GE has misled investors by failing to disclose deteriorating trends and the reasonably likely need for additional reserves to cover higher expected losses," she said. "Taken together, these disclosure errors created a deceptively positive picture of GE's overall business at the time."
Avakian said the SEC has also identified inadequacies in GE's internal accounting and disclosure controls and procedures. The commission found that GE made misleading statements and omissions to investors in earnings calls, industry conferences and "in their regular filings with the SEC," Avakian said.
The company also agreed to report to the SEC for a year on its accounting and disclosure policies and controls, the commission said.
A GE spokesperson said in a statement to CNBC that "it is in the best interests of GE and its shareholders to resolve this matter on the basis announced today," adding that the company has neither admitted nor denied the Commission's allegations have.
"Today's announcement completes the full scope of GE's SEC investigation and does not require any corrections or revisions to our financial statements," the spokesman said.
The deal ends the SEC's longstanding investigation into bad business practices among the conglomerate's former leadership team. Under CEO Larry Culp, executives are now trying to stage a comeback after years of decline. The company that made a name for itself selling lightbulbs now makes everything from large appliances to aircraft parts and medical equipment. It also has power, digital, and finance departments. The company also agreed to report to the SEC for one year on its accounting and disclosure policies and controls.
GE shares fell more than 1% after the close of trading on the news Wednesday after rising nearly 4% on the day.