Showing posts with label GE. Show all posts
Showing posts with label GE. Show all posts

Sunday, 24 April 2011

SEC Rewards GE Accounting Fraud

07:15 Jas


Aug 2009
Today, GE was fined $50 million by the SEC for committing accounting fraud. The fraud goes back to 2002 and 2003 relating to the reporting of sales that hadn't taken place and the inflation of company profits. The total amount that GE was to have falsified was $995 million which means that the penalty equaled only 5.24% of the fraud committed. That penalty is like a processing fee or a sales tax rather than an actual penalty.
In theory, the fraud helped stop the decline in GE's stock price, which resulted in the doubling of the market capitalization from 2002 to 2007. It was a well known secret that GE utilized cookie jar accounting and other more questionable methods to smooth out their earnings. Such methods were not in conformity with GAAP accounting rules. However, since it was so common among companies at the time the practice was easily overlooked.
Now the SEC rides in on a white horse to tell us that they'll save the day. The SEC says that they'll charge GE with a crime that was committed over 7 years ago. What has changed in the last seven years that the SEC couldn't recognize then that they can suddenly recognize now? What the SEC is essentially doing in this instance is taking their share of the fraud and allowing GE to keep the rest.
If it were up to me I would penalize GE in an amount equal to the fraud committed plus an additional 5% of annual revenue so that there is less inducement to commit the crime again (what really happens is that GE gets better at covering up the fraud.) After all, GE will write off the fines as a cost of doing business and move on to bigger and better things. For all intents and purposes GE has been rewarded by the SEC for the crime committed.

General Electric pays fine in accounting fraud charge

06:34 Jas

Washington - General Electric is to pay a 50-million-dollar fine for allegedly misleading investors with false financial statements, US regulators said Tuesday. The Securities and Exchange Commission claimed that GE used improper accounting practices in four separate incidents in 2002 and 2003 to increase reported earnings or revenue.
"GE bent the accounting rules beyond the breaking point," Robert Khuzami, the agency's director of the division of enforcement, said in a statement. "Overly aggressive accounting can distort a company's true financial condition and mislead investors."
The finding comes as part of a regulatory look into the potential misuse of hedge accounting. GE corrected the violations in the course of the investigation and has not admitted or denied the SEC's allegations. The violations occurred in the firm's commercial paper funding programme and in the reporting of locomotive and aircraft engine part sales, the SEC said.
The company agreed to pay the 50-million-dollar fine to settle the allegations.
In a statement, GE said it had cooperated with the government investigation and conducted its own internal review to make sure any issues were properly addressed.
"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, as previously described in our SEC filings, including measures to strengthen our controllership and technical accounting resources and capabilities," the Fairfield, Connecticut-based company said.

Posted by Earth Times Staff
http://www.earthtimes.org/articles/news/280208,general-electric-pays-fine-in-accounting-fraud-charge.html