General Electric pays off regulators with bailout money

SEC IS COMPLETELYWITHOUT ANY ENFORCEMENT CAPABILITY AND IS ONLY A FLY IN THE OINTMENT TO THE BIG CORPORATIONS SUCH AS BANK OF AMERICA AND GENERAL ELECTRIC. G.E. IS NOT ONLY GETTING AWAY WITH FRAUD BUT IS IS BEING CONDONED BY THE GOVERNMENT AND SEC IN SUCH A WAY TO MAKE IT MERELY A SCANT DISTRACTION TO THESE COMPANIES. DO AWAY WITH SEC AND INSTITUITE AN ORGINIZATION THAT IS EMPOWERED TO DEAL WITH THESE FRAUDS BEFORE WE WIND UP WITH THE BOOKS OF THESE CORPORATIONS COOKED AND FINANCIAL FRAUD BRINGING THE ECONOMY TO THE ENRON CONCLUSION.

Anne from GE here:

Your column above contains several errors of fact and interpretation I'd like to address.

You ask why would the SEC settle the case without requiring GE to admit guilt? Not admitting or denying wrongdoing is standard protocol for SEC settlements -- we are required NOT to admit or deny guilt. Those are the rules and they're dictated by the SEC.

You ask why wouldn't the SEC bar the responsible parties from serving as officers or directors for a period of time? As we disclosed in 2Q07, some employees in our Rail division were disciplined and in some cases separated from the company for inappropriate actions related to this issue. Beyond that, the SEC complaint does not allege any criminal behavior by individuals.

You opine "the grave accusations being made by the SEC don't seem to gel with the paltry size of the settlement and the lack of long-term repercussions for the company." I can't speak to your opinion about what size the penalty should have been, but to provide some context, as a whole, the cumulative net impact of all issues in the complaint decreased GE net earnings by $280M (0.24%) over the period at issue (2001-2007). That's right, the errors reduced GE earnings overall. As to long-term repercussions, as stated in our press release, we are pleased to have strengthened certain processes and controls and we emerge a stronger company.

Finally, you allege that the $50M fine is being paid with "bailout money," which it is not. First off, GE has not received a bailout from the US government. We do not participate in TARP. GE Capital has participated in the loan guarantee program TLGP, for which we have paid TO the government and taxpayers some $1.9 billion in fees. Furthermore, GE (the parent) guarantees the government guarantees provided to GE Capital under the TLGP program, further protecting taxpayers. Incidentally, the $50M SEC settlement fee, which comes out of GE Legal reserves, is paid to the Treasury Dept. and ultimately back to taxpayers.

Appreciate the opportunity to set the record straight.

If Anne is right, and you guys write articles that are THIS misinformed about the regulatory agencies and their connections with the companies you refer to, I don't want to take your stock advice and wont be returning to this site.

Anne appears to have coordinated a nice alternative view of General Electric's settlement with the SEC. Apparently, GE has made a mistake and no one (i.e., the Federal Government) has suffered from it. Anne, I am a stockholder, and I personally feel that I and other stockholders have suffered tremendously. As you stated, the cumulative impact of the errors reduced GE's earnings. Moreover, GE was required to pay (out of its legal reserves) a $50 million fine to the taxpayers. This amount pales in comparison to the millions GE exausted on legal expenses related to this case. Anne, while I am sure some will relish in your statement that the $50 million fine will "ultimately go back to taxpayers", it does nothing to enhance confidence of the many stockholders of GE. You see, in our minds, we feel that millions of dollars that have been lost are a reflection of the current management of GE. Yet there is no visible accountability. I would imagine that if the senior management team of GE were required to pay the fines and associated legal costs, there would be a far greater emphasis on accurate financial reporting. I'm sure GE will take "corrective" action as "deemed appropriate", but as a stockholder, I think the CEO needs to be held accountable. However, even with his dismal performance since Welch retired, I don't think he will ever be held accountable (and that sets the tone for the rest of the company).

Anne, I appreciate the opportunity to set the record straight as well.

In my opinion Jeff Immelt should be in the cell next to Mr. Madoff, for a much longer period of time. He has ruined GE and the retirees and stock holders are really suffering. He does not even care. Immelt in Prison!

I highly recommend the best movie I have seen about Stock market manipulation: Stock Shock. It is easy to understand and entertaining. On DVD only, of course. Amazon sells "Stock Shock." trailer is at www.stockshockmovie.com