GE gets "Wells notice" in SEC accounting probe
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CHICAGO (Reuters) - General Electric Co said on Friday it had been notified by U.S. regulators that a civil complaint could be filed against the company following a more than three-year-long probe into its use of hedge accounting for derivatives and other accounting matters.In a filing with the U.S. Securities and Exchange Commission, the company said SEC staff had issued a so-called "Wells notice" on Thursday, advising GE the agency may "bring a civil injunctive action against GE for possible violations of the securities laws."GE said it was continuing to cooperate with the agency but disagreed with its latest move.Russell Wilkerson, a spokesman for the company, said the filing by the SEC was standard procedure in complex disputes like the one GE is in with the agency."We have already disclosed these items in previously filed SEC reports, we have corrected our financial statements and where necessary implemented remedial measures," he said.SEC spokesman John Heine had no comment on the matter.The investigation, which began in January 2005, centers on GE's accounting policies and practices, including items related to revenue recognition and the company's presentation of cash flows.In the filing, GE said its dispute with the agency centered on how it accounted for a number of derivatives, including those it used to hedge against interest rate risk related to commercial paper, as well as the way its aviation, rail, healthcare and industrial businesses booked certain items.GE said that the net cumulative effect of the items in question on its financial statements was to reduce earnings by about $300 million in the period from 2001 through December 31, 2007.(Reporting by James Kelleher; additional reporting by Rachelle Younglai; editing by Carol Bishopric)
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