hypocritexposer
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How much did GE get in stimulus funds? Taxpayers will end up paying this fine.
Markowitz: Shoddy scandal at GE shocking
By Jack Markowitz
FOR THE TRIBUNE-REVIEW
Sunday, August 9, 2009
Say it ain't so, General. (But sad to say, it is.)
General Electric agreed to pay a $50 million fine this past week for cooking its books.
The "errors" -- that's what GE called them, errors -- made profits look better than they were at the "most admired company in America." For a little while, and not really by very much, a great firm managed to avoid disappointing the "analysts" who watch its stock.
The offenses occurred a half-dozen years ago and officially have been corrected and atoned for. Today's financial statements presumably are the last word in clean. Unnamed perpetrators got disciplined or fired.
Still, this happened at General Electric!
In what company can small investors and every pension and mutual fund under the sun believe if not the win-at-everything conglomerate once led by management whiz Jack Welch and, a century earlier, inventor Thomas Edison?
GE produces power plants, jet engines and medical imaging machines; televisions, windmill rotors and network news (NBC); locomotives (and there's no one bigger at that than at Erie, Pa.), and so much else.
But the bookkeeping? Shoddy. More exactly, too clever by half.
At least so it was in the 2002-2003 period that came under Securities and Exchange Commission scrutiny. A civil fraud probe -- not criminal -- started in 2005 and ended Tuesday in a Connecticut federal court, four long years (and $200 million in legal costs) later.
As often happens when white-collar fakery is caught, there was no formal admission of wrongdoing.
But what GE did, according to SEC enforcement director Robert Khuzami, was to "bend the accounting rules beyond the breaking point." It booked locomotive sales, for instance, in advance of signed orders. Result: a $370 million boost to revenues. A change in accounting for spare aircraft parts allowed net income to fly $585 million higher. Without a slight change in a "hedge" on short-term borrowing costs GE would have missed analysts' profit estimates for the first time in eight years.
Under SEC prodding the far-spreading enterprise had to restate earnings twice, always a disgrace.
"Overly aggressive accounting can distort a company's true financial condition and mislead investors," Khuzami lectured the company in court.
The publicity mill at GE's suburban Fairfield, Conn., headquarters responded in the sort of legalese guaranteed to put a courtroom to sleep. GE is "committed to the highest standards of accounting," it intoned. "The errors at issue fell short of our standards ... (We) have implemented numerous remedial actions and internal control enhancements to prevent such errors from recurring."
CEO Jeffrey Immelt apparently had no mea culpa for the record. He succeeded the colorful Welch in 2001 but hasn't extended the growth stock image, despite a politically blessed plunge into "green" markets. GE shares are down 16 percent so far this year to $13 or so, definitely the low-rent district for a blue chip like this.