GE Agrees to Pay $40 Million to Settle U.S. Investor SuitBob Van Voris
General Electric Co. agreed to pay $40 million to settle shareholder claims that the company misled them about the quality of its loan portfolio beginning in September 2008.
GE, based in Fairfield, Connecticut, settled claims against the company, its chief executive officer, Jeffrey Immelt, and Chief Financial Officer Keith Sherin, according to April 29 filings in Manhattan federal court. The plaintiffs are led by the State Universities Retirement System of Illinois.
The investors sued in 2009, claiming the company had overstated the value of holdings in its GE Capital unit, including its subprime loan holdings. The suit also targeted Goldman Sachs Group Inc. and other banks involved in GE’s October 2008, $12 billion secondary stock offering. The investors also claimed GE’s financial position threatened its AAA rating and ability to pay its quarterly dividend.
Before the settlement can go into effect, U.S. District Judge Denise Cote must grant the Illinois pension fund’s request to represent a class of investors who bought GE stock from Sept. 25, 2008, through March 19, 2009. Cote must also agree with the parties that the settlement is fair and adequate.
“This settlement is in the best interests of shareowners as we avoid diverting significant resources to a lawsuit that we believe is without merit,” Seth Martin, a GE spokesman, said in a statement yesterday.
In a pair of rulings, judges dismissed claims against the banks and other defendants, allowing the case to go forward only against GE, Immelt and Sherin on claims based on the Securities Exchange Act of 1934. The court found the investors’ claim that Sherin knew some of his statements about GE’s financial health in 2008 weren’t true was sufficiently substantiated to justify moving forward toward trial.
“The second amended complaint has described a plethora of reports which tracked on a regular and detailed basis the quality of the assets to which Sherin’s remarks were directed,” Cote said in a ruling last year. “It is highly implausible that GE’s CFO would be ignorant of basic facts contained in these reports about the quality of roughly one-third of GE Capital’s assets.”
Joseph Tabacco Jr., a lawyer for the investors, didn’t immediately return a phone message yesterday seeking comment on the settlement.
The case is In re General Electric Co. Securities Litigation, 09-01951, U.S. District Court, Southern District of New York (Manhattan).