Inside G.E., a Little Bit of Enron

New York Times ^ | 8/7/2009 | Floyd Norris

[SeekAndFind]

A decade ago, General Electric was the shining star of American business. Its longtime chief executive, Jack Welch, was named manager of the century by Fortune Magazine, and its stock seemed always to go up.

It ran a bewildering array of businesses but somehow always managed to make the expected profits. That record was viewed as proof of superior management, and the battle to succeed Mr. Welch in 2001 was watched all over the business universe. When a winner emerged, the losers quickly were hired to run other major companies.

G.E. is different now. The stock has fallen and the aura has dissipated.

This week General Electric agreed to pay $50 million to settle a suit filed by the Securities and Exchange Commission that said the company fiddled with its books repeatedly early in this decade. In at least one case, that allowed it to preserve its reputation for making the numbers. Some of the details are eerily reminiscent of Enron.

As is customary in such settlements, G.E. neither admitted nor denied the charges. But it sounded contrite. “The errors at issue fell short of our standards, and we have implemented numerous remedial actions and internal control enhancements to prevent such errors from recurring,” said a company statement.

[...]

It is notable how this investigation came to be. Post-Enron, the commission used its authority to look at G.E.’s books to figure out whether there were violations in the area of so-called hedge accounting, which determines whether companies can avoid reporting profits and losses from a variety of derivative securities.

[FromLori]

Crap and Tax and GE will make a killing $$$$

[parsifal]

All the more reason we don’t need more regulation. (Sarcasm button on). As an acct in a previous life, I made up this little jingle years ago:

See the little numbers change
Perfoming merry dances.
The guys who make them hop and skip
Are certified accountants.

parsy, who is not surprised

[throwback]

And GE owns which network? And Immelt is an adviser to which president? Don't get this being in the NYT, somebody forget and have pang of conscience?

[AZLiberty]

This week General Electric agreed to pay $50 million to settle a suit filed by the Securities and Exchange Commission that said the company fiddled with its books repeatedly early in this decade. In at least one case, that allowed it to preserve its reputation for making the numbers.

In my younger days, I wondered why, when a company missed its earnings estimates by a penny, the market would drive the stock price down by 20% or more. The market knew, however, that if a company was in such bad shape that it couldn't find a penny in earnings in all the slush funds, special accounts, and creative accounting that companies have available, then it must really be in trouble.

[SnuffaBolshevik]

How’s that B.S. Lean Six Sigma workin’ out for you now, Jeffy?