Boston-based GE first disclosed the government investigation into its accounting practices in 2018, after a multibillion-dollar underestimate of its insurance business created a shortfall in its reserves. At the time, then-Chief Financial Officer Jamie Miller said on a conference call with analysts, “There’s nothing here I‘m overly concerned about.” The SEC also delved into how GE recognized revenue from long-term service agreements for the maintenance of industrial equipment, including power plants and jet engines.
In a statement Tuesday to The Washington Post, GE said it has “fully cooperated with the SEC’s investigation,” adding, “We strongly disagree with the recommendation of the SEC staff and will provide a response through the Wells notice process.” GE said it is providing documents and other information requested by the SEC.
The SEC declined to comment.
GE will be given an opportunity to make a case against enforcement. But if the government proceeds, it could seek an injunction against future violations of securities law and impose fines. GE acknowledged a level of uncertainty in the filing on what the investigation means for its business: “The results of the Wells notice and any enforcement action are unknown at this time.”
Like other companies in the aviation business, GE has been battered by the coronavirus. In May, the company said it would cut 13,000 jobs from its jet engine operation. Industry executives have said it will take years for the aviation business to return to pre-pandemic levels. From its recent peak in February, the value of GE shares has been cut in half.
News of the Wells notice shook investors further, and the stock slumped 3.7 percent to close at $6.17. But the broader market was also hit by an update from President Trump, who tweeted Tuesday afternoon that he was withdrawing from stimulus negotiations until after the Nov. 3 election. He said he had instructed Treasury Secretary Steven Mnuchin to halt talks with Democratic leaders.
Investors have for months monitored the negotiations for signs of a breakthrough. Economic experts and government officials, including Federal Reserve Chair Jerome H. Powell, have tied the recovery of the U.S. economy to further government aid, highlighting the importance a deal. Just hours before Trump said he ended negotiations, Powell warned that insufficient support from policymakers could batter the economy further and imperil the recovery.