(Bloomberg) — General Electric Co. warned that it’s likely to face U.S. Securities and Exchange Commission allegations of accounting misdeeds, setting back Chief Executive Officer Larry Culp’s effort to put the company’s rocky past behind it.
GE received a Wells notice Sept. 30 advising that the SEC may pursue a civil enforcement action over possible securities violations tied to an old insurance business, according to a company regulatory filing Tuesday. The agency has yet to decide whether to recommend action on issues related to GE’s power-equipment business that are also under investigation.
The Wells notice reopens old wounds from a previously disclosed SEC investigation just as the company is trying to restart a turnaround upended by the coronavirus pandemic. In early 2018, about six months after Culp predecessor John Flannery took over from Jeffrey Immelt, GE disclosed a $6.2 billion charge related to an insurance portfolio of long-term care policies and said it would pay $15 billion over seven years to fill a shortfall in reserves.
“Most investors seem to believe that the government ultimately is likely to slap GE with a nominal fine. However, the matter could also result in more significant consequences,” John Inch, an analyst at Gordon Haskett, said in a note to clients.
“The largest risk(s) could pertain to GE’s possible future requirement to restate past financials and/or incur additional write-offs — potentially materially squeezing the trajectory for a return to higher future reported profitability,” Inch said.
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