GE may face civil action on securities violations

FAIRFIELD, Conn. (AP) -- General Electric Co. said Friday it has been informed that the Securities and Exchange Commission may recommend fines and other action for possible violations of securities law related to accounting changes the company made.

GE said in a regulatory filing that the notification, called a "Wells notice," is related to issues dating to several years ago concerning GE's accounting for certain derivatives used for hedging interest rate risk and other transactions.

GE said it disagrees with a recommendation for civil action and is cooperating with the SEC.

The conglomerate says the change was made in its accounting for profits in 2002 on some aftermarket spare parts, primarily in its aviation business, transactions in 2003 and earlier involving financial intermediaries in its rail business and other GE units.

The impact of the changes was to reduce net earnings by about $300 million from 2001 through Dec. 31, 2007, GE said.

Net earnings for GE, which makes locomotives, water treatment plants and owns NBC-Universal, totaled $22.2 billion last year.

GE said it has established "remedial actions and internal control enhancements" that have been reviewed or discussed with its accounting firm, which audited all GE financial statements in the period under review.

GE, based in Fairfield, disclosed in 2005 that in a regular audit review, it concluded it improperly accounted for financial instruments used to protect the company's financial services businesses from changes in interest rates and currency exchange rates.