General Electric wins partial rejection of shareholder lawsuit

NEW YORK (Reuters) – A Manhattan federal judge on Thursday dismissed a lawsuit filed by investors in General Electric Co., accusing the company of hiding a $ 24 billion insurance liability and using it. fraudulent accounting to support its electricity business.

Judge Jesse Furman, however, authorized the shareholders to amend their complaint. The class action suit, originally launched in November 2017, is a combination of six cases designed to hold GE and its top executives accountable for falling profits in recent years.

The lawsuit, filed by more than a dozen US and foreign pension funds, pension funds and investors at GE, names the company and its former CEOs Jeff Immelt, John Flannery and other executives. They allege that they underestimated GE's exposure to the risks associated with long-term care insurance and long-term service contracts with customers who purchased GE plant equipment.

"Applicants may claim additional facts regarding knowing or knowingly ignoring GE's actuarial issues (regarding its LTC portfolio), as well as trends and risks that it should have disclosed (with respect to LTS) that will allow plaintiffs to clear the bar of scientists, "Furman wrote in his decision, referring to the legal term used to refer to knowing wrongdoing.

GE did not immediately respond to requests for comment.

The decision came just after whistleblower Madoff, Harry Markopolos, said GE's insurance industry was underfunded by what it owed for long-term care policies.

A subsequent report by Fitch Ratings ranked GE's insurance units among those most exposed to long-term care and those least prepared to pay such claims.

The lawsuit alleges that since the beginning of 2013, Immelt and other GE executives have repeatedly misled investors into claiming that GE had sold its insurance business, even though GE remained responsible for long-term care policies. deficit duration.

Insurance policies, which cover the cost of assisted living or nursing care for the elderly, actually require much larger payments from insurers than expected when writing policies over the years. 1990 and early 2000s.

In January 2018, GE took a surprise charge of $ 6.2 billion after tax and began to reserve $ 15 billion to cover future claims for compensation of about 300,000 long-term care policies duration.

GE has denied using fraudulent accounting to hide the drop in sales and profits of its food unit. Investors have been hit by "business setbacks and missing forecasts," which GE revealed at the time. GE also stated that the prosecution did not provide specific information that it should have provided "that a reasonable investor should avoid being misled".