General Electric charged in accounting fraud

— -- The Securities and Exchange Commission on Tuesday charged General Electricge with committing accounting fraud spanning several years.

Specifically, the SEC accused GE of inflating its earnings and revenue in 2002 and 2003 so it could beat investors' expectations, misleading investors as a result.

The SEC accused GE of four separate accounting violations involving false bookkeeping for investments, including commercial paper and interest-rate swaps, as well as sales of locomotives and aircraft-engine spare parts.

"We intend to pursue any company, regardless of reputation or size, if that company misused the accounting rules to achieve a result," says David Bergers, director of the SEC's Boston office.

GE agreed to pay a $50 million fee to settle the charges. It neither admitted nor denied any allegations made by the SEC. The company says it corrected errors in regulatory filings between May 2005 and February 2008.

The charges are just the latest embarrassment for the company, which has been one of the most widely held stocks by investors for years.

Earlier this year, the company lost its prized AAA debt rating from Standard & Poor's. And late last year, GE turned to Warren Buffett's Berkshire Hathaway for a cash infusion in exchange for a preferred stock that paid a steep 10% annual dividend.

GE's shares this year are down 14.7%, lagging behind the Standard & Poor's 500 and Dow Jones industrial average, which are up 11.3% and 6.2%, respectively.

The SEC charges come after a string of three earnings restatements from GE, says Mark Cheffers of accounting information provider Audit Analytics. The SEC's strongly worded statement did not, as is common in such investigations, thank GE for cooperating in the investigation.

The SEC staff "must have been very upset with what they saw," Cheffers says. In its own release, GE says it "cooperated with the SEC over the course of its investigation."

Despite the alleged accounting problems at GE, earnings restatements are declining. There were 869 restatements in 2008, down 30% from 2007 and down 52% from 2006, says Audit Analytics.

While the SEC's investigation of GE's accounting is concluded, it may be looking into other related matters, Bergers says, declining to elaborate.

GE spokeswoman Anne Eisele says the accounting errors had an insignificant impact on executive compensation. The misstatements actually caused the aggregate pay of hundreds of officers and directors in the performance award program to be reduced $10 million over a nine-year period, she says.