NEW YORK (Reuters) – A Manhattan federal judge on Thursday partially dismissed a lawsuit from investors in General Electric Co who accused the company of hiding $ 24 billion in insurance liabilities and using fake accounts to support its power business.
FILE PHOTO: The General Electric Co. logo is seen at the company's headquarters building in Boston, Massachusetts, July 23, 2019. REUTERS / Alwyn Scott / File Photo
Judge Jesse Furman, however, allowed shareholders to amend his complaint. The class action lawsuit, originally filed in November 2017, confirms six cases that sought to hold GE and its top executives responsible for declining profits in recent years.
The suit, brought by more than a dozen US and foreign pension plans, pension funds and investors in GE, names the company and former CEOs Jeff Immelt, John Flannery and other top executives. It claims that they underestimated GE's exposure to long-term insurance risk and risk associated with its long-term service agreements with customers who purchased GE power plant equipment.
“Plaintiffs may be able to assert further facts regarding individual defendants' knowledge, or knowingly disregarding GE's actuarial relationship (with respect to the LTC portfolio) and the trends and risks it should have disclosed (with respect to its LTSA) that would allow plaintiffs to clear the sciences bar, ”Furman wrote in his ruling, referring to the legal term for knowledge of wrongdoing.
GE did not immediately respond to comment requests.
The ruling comes just after Madoff whistleblower Harry Markopolos said GE's insurance business was underfunded for what it owed to long-term care policy.
A subsequent Fitch Ratings report ranked GE's insurance units as among the most vulnerable to long-term care and least prepared to pay such claims.
The suit alleges that Immelt and other top GE executives from early 2013 repeatedly mislead investors by saying that GE had sold its insurance business, even though GE remained responsible for losing monetary policy for long-term care.
The insurance policies, which cover the cost of elderly care or care for the elderly, have been found to require much larger payments from the insurance companies than were expected when the insurance policies were written in the 1990s and early 2000s.
In January 2018, GE took a surprise of $ 6.2 billion after tax and began depositing $ 15 billion to meet future requirements from around 300,000 long-term policies.
GE has refused to use fraudulent accounting to hide falling sales and profits from its power unit. It said investors were victims of "business setbacks and forecasting losses" that GE revealed at the time. GE also said the suit did not point to specific information it should have provided "that a reasonable investor might need to avoid being misled."
Reporting by Alwyn Scott, Editing by Rosalba O & # 39; Brien & Dan Grebler