General Electric Co has agreed to pay $40 million to settle a shareholder lawsuit accusing the conglomerate of misleading investors about its health and exposure to risky debt during the 2008 financial crisis. The lawsuit alleged that GE, Chief Executive Jeffrey Immelt and Chief Financial Officer Keith Sherin were responsible for investor losses in a six-month period when GE’s stock price fell as much as 77 percent, wiping out about $200 billion of market value. Shareholders, led by the State Universities Retirement System of Illinois, accused the world’s largest maker of jet engines and electric turbines of hiding billions of dollars of troubled subprime and other loans at its GE Capital unit.
It was also alleged that General Electric misled the investors about its ability to generate earnings and pay its dividend, and failed to make necessary disclosures when conducting a $12.2 billion stock offering in October 2008. GE in March 2009 lost its “AAA” credit rating from Standard & Poor’s and cut its dividend 68 percent. This was GE’s first dividend reduction since 1938, despite having received $3 billion from Warren Buffett’s Berkshire Hathaway Inc in late 2008. The settlement requires court approval.
The lawsuit sought class-action status for shareholders who held GE common stock between September 25, 2008 and March 19, 2009. GE shares bottomed at $5.87 on March 4, 2009, after beginning the class period at $25.68, according to Reuters data. The case is In re: General Electric Co Securities Litigation, in the U.S. District Court, Southern District of New York.
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