NEW YORK (Reuters) – A federal judge in Manhattan on Thursday partially dismissed a lawsuit filed by investors in General Electric Co, which accused the company of hiding $ 24 billion in insurance liabilities and using fraudulent accounting, to drive forward its electricity business.
FILE PHOTO: The General Electric Co. logo is on the company's headquarters in Boston, Massachusetts, on July 23, 2019. REUTERS / Alwyn Scott / File Photo
Judge Jesse Furman, however, granted the shareholders permission to amend their complaint. The class action, originally filed in November 2017, brings together six cases that attempted to hold GE and its executives accountable for declining profits in recent years.
The lawsuit, filed by more than a dozen US and foreign pension plans, pension funds and GE investors, mentions the company and former Chief Executive Officers Jeff Immelt, John Flannery and other executives. It is alleged that they underestimated GE's risk for long-term care insurance and the risks associated with long-term service contracts with customers who purchased GE's power equipment.
"Plaintiffs may be able to claim additional facts regarding the knowledge of each defendant or the deliberate disregard of GE's actuarial problems (in relation to its LTC portfolio) and the trends and risks that it should have disclosed ( This would allow the plaintiffs to suspend the barring of lawyers, "Furman wrote in his ruling, referring to the legal notion of misconduct.
GE did not respond immediately to comment requests.
The ruling comes immediately after the rogue of Madoff, Harry Markopolos, after finding that GE's underwriting business is underfunded compared to its long-term care liabilities.
In a subsequent report on Fitch Ratings, GE's insurance units were identified as the ones most affected by long-term care and least willing to pay for such claims.
The lawsuit alleges that GE's Immelt and other senior executives repeatedly misled investors from the beginning of 2013, claiming that GE had sold its insurance business despite GE's continuing liability for long-term care insurance.
The insurance policies covering the costs of assisted living or caring for the elderly required much greater payouts from insurers than they did when the policies were completed in the 1990s and early 2000s.
In January 2018, GE accepted a surprise $ 6.2 billion after-tax charge and provided $ 15 billion to cover future claims on approximately 300,000 long-term care insurances.
GE has denied using fraudulent accounting to conceal declining revenues and profits in its performance section. Investors were victims of "setbacks and forecasting accidents", which GE announced at the time. GE also said that the complaint did not contain any specific information that should have provided "that a reasonable investor should avoid being misled".
Reporting by Alwyn Scott, Editors of Rosalba O & Brien and Dan Grebler