Brooke Sutherland, Columnist

GE Is Still Haunted by a '$15 Billion Problem'

An SEC notice of possible penalties over the company's handling of an insurance business is a reminder of the many troublesome legacy issues that remain.

October 6, 2020 at 9:13 PM UTC

By Brooke Sutherland

Brooke Sutherland is Bloomberg News' Boston bureau chief and writes the Industrial Strength Newsletter. She was previously a Bloomberg Opinion columnist covering deals and industrial companies and an M&A reporter for Bloomberg News.

Amid a turnaround, past problem spots need resolving, too.
Photographer: Goh Seng Chong/Bloomberg

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Try as it might, General Electric Co. can’t escape its past. The latest reminder came on Tuesday when the embattled industrial giant said it had received a “Wells notice” from staff at the Securities and Exchange Commission — a warning that the regulator may pursue civil action over the potential violation of securities laws.

At issue is GE’s handling of a legacy insurance business and its disclosure in 2018 of a surprise $15 billion shortfall in reserves that were supposedly stress-tested each year. As Vertical Research analyst Jeff Sprague put it when the massive deficiency was first announced, “It is hard to imagine a $15 billion problem materialized in the course of the year."