- The Washington Times - Wednesday, August 5, 2009

General Electric Co. will pay a $50 million civil penalty to settle charges filed by the Securities and Exchange Commission accusing the conglomerate of improper accounting in order to make its financial results appear more attractive to investors.

The SEC said Tuesday that GE violated U.S. securities laws four times between 2002 and 2003 when accounting for items like commercial-paper funding and the sale of train locomotives and aircraft-engine spare parts. The SEC said the changes helped GE maintain a string of earnings that beat Wall Street expectations each quarter from 1995 through 2004.

“GE bent the accounting rules beyond the breaking point,” said Robert Khuzami, head of the SEC’s enforcement division.

The Fairfield, Conn., company said that it corrected its financial statements during SEC filings made between 2005 and 2008. An unspecified number of employees working on the locomotive transactions were fired, and GE has implemented new internal accounting controls, a GE spokeswoman said.

In other SEC action, the agency said it is moving toward banning a trading practice that gives some brokerages a split-second advantage in buying or selling stocks.

SEC Chairman Mary Schapiro said Tuesday that the agency is working to create a rule to ban the trades known as flash orders.

Flash orders give certain members of exchanges the ability to buy and sell order information for milliseconds before that information is made public. High-speed computer software can take advantage of that brief period to allow those members to get better prices and profits.

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