Editing General Electric (section)

===Fraud allegations and notice of possible SEC civil action===
On August 15, 2019, [[Harry Markopolos]], a financial fraud investigator known for his discovery of a Ponzi scheme run by [[Bernard Madoff]], accused General Electric of being a "bigger fraud than Enron," alleging $38&nbsp;billion in accounting fraud. GE denied wrongdoing.<ref>{{Cite web|url=https://www.bbc.com/news/business-49352765|title=General Electric: Madoff Investigator alleges $38bn in fraud|first=Russell|last=Hotten|date=August 15, 2019|website=BBC|access-date=August 16, 2019|archive-url=https://web.archive.org/web/20190816001833/https://www.bbc.com/news/business-49352765|archive-date=August 16, 2019|url-status=live}}</ref><ref>{{cite web |url=https://www.cnn.com/2019/08/15/investing/general-electric-harry-markopolos-whistleblower-accounting/index.html |title=GE stock has worst day in 11 years after Madoff whistleblower calls it a bigger fraud than Enron |work=CNN Business |author=Paul R. La Monica |date=August 15, 2019 |access-date=August 15, 2019 |archive-url=https://web.archive.org/web/20190815175942/https://www.cnn.com/2019/08/15/investing/general-electric-harry-markopolos-whistleblower-accounting/index.html |archive-date=August 15, 2019 |url-status=live }}</ref>

On October 6, 2020, General Electric reported it received a [[Wells notice]] from the [[Securities and Exchange Commission]] stating the SEC may take civil action for possible violations of securities laws.<ref>{{cite web |author1=Jonathan Ponciano |title=General Electric Says SEC Has Issued 'Wells Notice' Recommending Civil Action Over Shaky Accounting Practices |url=https://www.forbes.com/sites/jonathanponciano/2020/10/06/general-electric-says-sec-has-issued-wells-notice-recommending-civil-action-over-accounting-practices/#edd5b22317f5 |website=www.Forbes.com |access-date=October 15, 2020 |language=en |date=October 6, 2020 |archive-date=November 27, 2020 |archive-url=https://web.archive.org/web/20201127163953/https://www.forbes.com/sites/jonathanponciano/2020/10/06/general-electric-says-sec-has-issued-wells-notice-recommending-civil-action-over-accounting-practices/#edd5b22317f5 |url-status=live }}</ref>

====Insufficient reserves for long-term care policies====
It is alleged that GE is "hiding" (i.e., under-reserved)<ref>{{cite web |author1=Alwyn Scott |title=General Electric insurance called 'risky' by Fitch; shares fall again |url=https://ca.reuters.com/article/businessNews/idCAKCN1VA1C2-OCABS |website=Reuters.com |access-date=August 22, 2019 |language=en |date=August 20, 2019 |quote=The Fitch report, which the credit rating agency produces annually, echoed concerns raised last week by financial investigator Harry Markopolos, who estimated that GE has under-reserved by $29 billion for its long-term care policies. |archive-url=https://web.archive.org/web/20190822143459/https://ca.reuters.com/article/businessNews/idCAKCN1VA1C2-OCABS |archive-date=August 22, 2019 |url-status=dead }}</ref> $29&nbsp;billion in losses related to its long-term care business.<ref name="Yahoo Finance">{{cite web |title=General Electric whistleblower: 'I think I have a few smoking guns' Harry Markopolos reveals fraud |url=https://www.youtube.com/watch?v=3jE10T250bo |website=YouTube |publisher=Yahoo Finance |access-date=August 21, 2019 |language=en |time=M:SS=1.47 |date=August 15, 2019 |quote=GE is hiding $29B in long-term care losses |archive-url=https://web.archive.org/web/20190820145045/https://www.youtube.com/watch?v=3jE10T250bo |archive-date=August 20, 2019 |url-status=live }}</ref>

According to an August 2019 Fitch Ratings report, there are concerns that GE has not set aside enough money to cover its long-term care liabilities.<ref>{{cite web |author1=Alwyn Scott |title=General Electric insurance called 'risky' by Fitch; shares fall again |url=https://ca.reuters.com/article/businessNews/idCAKCN1VA1C2-OCABS |website=Reuters.com |access-date=August 22, 2019 |language=en |date=August 20, 2019 |quote=General Electric Co (GE.N) ranks among the riskiest backers of long-term care insurance, suffering from both high exposure to claims and a relatively small cash pile to pay them, Fitch Ratings said in a report on Tuesday |archive-url=https://web.archive.org/web/20190822143459/https://ca.reuters.com/article/businessNews/idCAKCN1VA1C2-OCABS |archive-date=August 22, 2019 |url-status=dead }}</ref>

In 2018, a lawsuit (the Bezio case) was filed in New York state court on behalf of participants in GE's 401(k) plan and shareowners alleging violations of Section 11 of the [[Securities Act of 1933]] based on alleged misstatements and omissions related to insurance reserves and performance of GE's business segments.<ref>{{cite web |author1=General Electric |title=2018 Annual Report – General Electric |url=https://www.ge.com/investor-relations/sites/default/files/GE_AR18.pdf |website=GE.com |access-date=August 20, 2019 |pages=87 |language=en |archive-url=https://web.archive.org/web/20190923162718/https://www.ge.com/investor-relations/sites/default/files/GE_AR18.pdf |archive-date=September 23, 2019 |url-status=dead }}</ref>

The Kansas Insurance Department (KID) is requiring General Electric to make $14.5&nbsp;billion of capital contributions for its insurance contracts during the 7-year period ending in 2024.<ref>{{cite web |author1=General Electric |title=2018 Annual Report – General Electric |url=https://www.ge.com/investor-relations/sites/default/files/GE_AR18.pdf |website=GE.com |access-date=August 20, 2019 |pages=67 |language=en |quote=The adverse impact on our statutory AAR arising from our revised assumptions in 2017, including the collectability of reinsurance recoverables, is expected to require GE Capital to contribute approximately $14.5 billion additional capital, to its run-off insurance operations in 2018-2024. For statutory accounting purposes, KID approved our request for a permitted accounting practice to recognize the 2017 AAR increase over a seven-year period. GE Capital provided capital contributions to its insurance subsidiaries of approximately $3.5 billion and $1.9 billion in the first quarter of 2018 and 2019, respectively. GE Capital expects to provide further capital contributions of approximately $9 billion through 2024, subject to ongoing monitoring by KID. |archive-url=https://web.archive.org/web/20190923162718/https://www.ge.com/investor-relations/sites/default/files/GE_AR18.pdf |archive-date=September 23, 2019 |url-status=dead }}</ref>

GE reported the total liability related to its insurance contracts increased significantly from 2016 to 2019:
:December 31, 2016 $26.1&nbsp;billion
:December 31, 2017 $38.6&nbsp;billion<ref>{{cite web |author1=General Electric |title=2017 GE Annual Report |url=https://www.annualreports.com/HostedData/AnnualReportArchive/g/NYSE_GE_2017.pdf |website=www.AnnualReports.com |publisher=General Electric |access-date=October 19, 2020 |page=152 |language=en |archive-date=November 26, 2020 |archive-url=https://web.archive.org/web/20201126153730/https://www.annualreports.com/HostedData/AnnualReportArchive/g/NYSE_GE_2017.pdf |url-status=live }}</ref>
:December 31, 2018 $35.6&nbsp;billion<ref>{{cite web |author1=General Electric |title=2018 Annual Report – General Electric |url=https://www.ge.com/investor-relations/sites/default/files/GE_AR18.pdf |website=GE.com |access-date=August 20, 2019 |pages=61 |language=en |archive-url=https://web.archive.org/web/20190923162718/https://www.ge.com/investor-relations/sites/default/files/GE_AR18.pdf |archive-date=September 23, 2019 |url-status=dead }}</ref> 
:December 31, 2019 $39.6&nbsp;billion<ref>{{cite web |author1=General Electric |title=2019 Annual Report – General Electric |url=https://www.ge.com/sites/default/files/GE_AR19_AnnualReport.pdf |website=GE.com |access-date=October 15, 2020 |pages=87 |language=en |archive-date=October 1, 2020 |archive-url=https://web.archive.org/web/20201001023009/https://www.ge.com/sites/default/files/GE_AR19_AnnualReport.pdf |url-status=live }}</ref>

In 2018, GE announced that the issuance of the new standard by the Financial Accounting Standards Board (FASB) regarding Financial Services – Insurance (Topic 944) would materially affect its financial statements.<ref>{{cite web |author1=General Electric |title=Follow Up From Last Week's Note |url=https://www.ge.com/investor-relations/sites/default/files/ge_webcast_10Q_10302018.pdf |website=GE.com |access-date=August 21, 2019 |language=en |quote=We have stated in disclosures beginning with our 3Q’18 10-Q (page 48) that, following the issuance of the new standard by the FASB in August 2018, we anticipate that the adoption of the new standard will materially affect our financial statements. |archive-url=https://web.archive.org/web/20190820235127/https://www.ge.com/investor-relations/sites/default/files/ge_webcast_10Q_10302018.pdf |archive-date=August 20, 2019 |url-status=dead }}</ref><ref>{{cite web |title=FORM 10-Q September 2018 |url=https://www.ge.com/investor-relations/sites/default/files/ge_webcast_10Q_10302018.pdf |website=GE.com |publisher=General Ledger |access-date=August 21, 2019 |language=en |quote=In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-12, Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. We are evaluating the effect of the standard on our consolidated financial statements and anticipate that its adoption will significantly change the accounting for measurements of our long-duration insurance liabilities. The ASU requires cash flow assumptions used in the measurement of various insurance liabilities to be reviewed at least annually and updated if actual experience or other evidence indicates previous assumptions need to be revised with any required changes recorded in earnings. The discount rate, equivalent to the upper-medium grade (i.e., single A) fixed-income instrument yield reflecting the duration characteristics of the liability, is required to be updated in each reporting period with changes recorded in accumulated other comprehensive income. In measuring the insurance liabilities, contracts shall not be grouped together from different issue years. While we continue to evaluate the effect of the standard on our ongoing financial reporting, we anticipate that the adoption of the ASU may materially affect our financial statements. |archive-url=https://web.archive.org/web/20190820235127/https://www.ge.com/investor-relations/sites/default/files/ge_webcast_10Q_10302018.pdf |archive-date=August 20, 2019 |url-status=dead }}</ref>  Mr. Markopolos estimated there would be a $US 10.5&nbsp;billion charge when the new accounting standard is adopted in the first quarter of 2021.<ref>{{cite web |title=General Electric whistleblower: 'I think I have a few smoking guns' Harry Markopolos reveals fraud |url=https://www.youtube.com/watch?v=3jE10T250bo |website=YouTube |publisher=Yahoo Finance |access-date=August 21, 2019 |language=en |time=M:SS=3.25 |date=August 15, 2019 |quote=GE is hiding $29B in long-term care losses |archive-url=https://web.archive.org/web/20190820145045/https://www.youtube.com/watch?v=3jE10T250bo |archive-date=August 20, 2019 |url-status=live }}</ref>

====Anticipated $8 billion loss upon disposition of Baker Hughes====
In 2017, GE acquired a 62.5% interest in Baker Hughes (BHGE) when it combined its oil & gas business with Baker Hughes Incorporated.<ref>{{cite web |title=2017 Annual Report |url=https://www.ge.com/investor-relations/sites/default/files/GE_AR17.pdf |website=GE.com |access-date=August 20, 2019 |pages=21 |language=en |archive-url=https://web.archive.org/web/20180412212038/https://www.ge.com/investor-relations/sites/default/files/GE_AR17.pdf |archive-date=April 12, 2018 |url-status=dead }}</ref>
In 2018, GE reduced its interest to 50.4%, resulting in the realization of a $2.1&nbsp;billion loss.  GE is planning to divest its remaining interest and has warned that the divestment will result in an additional loss of $8.4&nbsp;billion (assuming a BHGE share price of $23.57 per share).<ref>{{cite web |author1=General Electric |title=2018 Annual Report – General Electric |url=https://www.ge.com/investor-relations/sites/default/files/GE_AR18.pdf |website=GE.com |access-date=August 20, 2019 |pages=139 |language=en |quote=As previously announced, we plan an orderly separation of our ownership interest in BHGE over time. In November 2018, BHGE completed an underwritten public offering in which we sold 101.2 million shares of BHGE Class A common stock. BHGE also repurchased 65.0 million BHGE LLC units from GE. As a result, our economic interest in BHGE reduced from 62.5% to 50.4%, and we recognized a loss of $2,169 million ($1,696 million after-tax), which decreased the Other Capital component of shareowners' equity. The sale of Class A common stock resulted in an increase in noncontrolling interests of $4,214 million. Any reduction in our ownership interest below 50% will result in us losing control of BHGE. At that point, we would de-consolidate our Oil & Gas segment, recognize any remaining interest at fair value and recognize any difference between carrying value and fair value of our interest in earnings. Depending on the form and timing of our separation, and if BHGE's stock price remains below our current carrying value, we may recognize a significant loss in earnings. Based on BHGE's share price on January 31, 2019, of $23.57 per share, the incremental loss upon deconsolidation by a sale of our interest would be approximately $8,400 million. |archive-url=https://web.archive.org/web/20190923162718/https://www.ge.com/investor-relations/sites/default/files/GE_AR18.pdf |archive-date=September 23, 2019 |url-status=dead }}</ref> In response to the fraud allegations, GE noted the amount of the loss would be $7.4&nbsp;billion if the divestment occurred on July 26, 2019.<ref>{{cite web |title=follow-up-from-last-weeks-note |url=https://www.ge.com/reports/follow-up-from-last-weeks-note/ |website=GE.com |publisher=General Electric |access-date=August 20, 2019 |language=en |archive-url=https://web.archive.org/web/20190820234938/https://www.ge.com/reports/follow-up-from-last-weeks-note/ |archive-date=August 20, 2019 |url-status=live }}</ref>  Mr. Markopolos noted that BHGE is an asset available for sale and therefore [[mark-to-market accounting]] is required.<ref>{{cite web |title=Harry Markopolos explains fraud accusations against GE |url=https://www.youtube.com/watch?v=MGvsXPY26KI |website=YouTube |publisher=CNN Business |access-date=August 21, 2019 |time=5:17 |language=en |date=August 16, 2019 |quote=They should have marked it to market |archive-url=https://web.archive.org/web/20190818074723/https://www.youtube.com/watch?v=MGvsXPY26KI |archive-date=August 18, 2019 |url-status=live }}</ref>

Markopolos noted GE's [[current ratio]] was only 0.67.<ref name="Yahoo Finance"/> He expressed concerns that GE may file for bankruptcy if there is a recession.<ref>{{cite web |title=Madoff whistleblower Harry Markopolos details fraud allegations against General Electric |url=https://www.youtube.com/watch?v=2VCtB3E0JB0 |publisher=YouTube / CNBC |access-date=August 21, 2019 |time=5:56 |date=August 15, 2019 |quote=Harry Markopolos on GE "Heading for bankruptcy" |archive-url=https://web.archive.org/web/20190820112812/https://www.youtube.com/watch?v=2VCtB3E0JB0 |archive-date=August 20, 2019 |url-status=live }}</ref>