As former General Electric CEO John Flannery knew all too well, everywhere you look at the formerly great American industrial giant there’s a new, unwelcome discovery. The Securities and Exchange Commission knows this too, but luckily for John Flannery it’s not his problem anymore.
It started for the SEC more or less the same place it started for Flannery: the horrifying funhouse mirror approach to accounting taken under his predecessors. And just as everywhere Flannery looked there seemed to be an empty private jet criss-crossing the globe, everywhere the SEC looks it seems to find some other aspect of GE’s bookkeeping wanting.
General Electric said on Tuesday it has received a notice from U.S. Securities and Exchange Commission staff, warning that the company could face a civil action for possible violations of securities laws related to accounting practices for some of its insurance holdings…. Securities regulators opened a probe into the company’s accounting practices after the massive insurance charge. The inquiry, which initially focused on long-term service agreements for maintenance of power plants, jet engines and other industrial equipment, was later expanded to include GE’s review of its insurance business.
The stock was up about 1.6% just before the 8-K was filed, then fell off a cliff on heavy volume to sink as much as 4.5% at about 2:31 p.m., before paring some losses. The stock closed down 3.7% at $6.17, above the intraday low of $6.11. Trading volume ballooned to 169.1 million shares, enough to make it the most actively traded stock listed on the New York Stock Exchange, and well above the full-day average of about 101.2 million shares.