GE settles $362.5 Million Shareholder Dispute In District Court Over Power Unit

GE settles $362.5 million shareholder dispute in District Court over power unit

General Electric (GE), doing business as GE Aerospace, has agreed to pay $362.5 million in cash to resolve a long-running shareholder lawsuit. The lawsuit alleges that GE hid risks related to its power business and misled shareholders about its financial standing.

A preliminary settlement of the proposed class action was filed in the US District Court, Southern District of New York. It must be approved by Judge Jesse Furman, who in September 2023 refused to dismiss the case while warning a trial would be "expensive and risky" for both entities.

The lawsuit, filed in 2017, pertained to GE's reliance on factoring or the sale of future revenue for cash with long-term service agreements at its GE Power unit. Shareholders led by two pension funds, Cleveland Bakers and Teamsters Pension Fund and Sweden's Sjunde AP-Fonden, complained that the power unit increasingly relied on factoring to boost revenue and sacrificed cash flows. They added that the unit lacked contracts, and GE’s stock price fell after ‘blindsiding’ investors with unexpected exposure of billions of dollars.

The case covered alleged misleading disclosures from February 2016 to January 2018 by GE and former Chief Financial Officer Jeffrey Bornstein.

However, both denied any wrongdoing.

In January 2021, Judge Furman overruled separate fraud claims concerning a GE insurance portfolio and dismissed former Chief Executive Jeffrey Immelt as a defendant.

Recently, Evendale, Ohio-based GE paid $200 million to settle the Securities and Exchange Commission (SEC) charges of misleading investors on power and insurance businesses. It has set aside funds for the settlement in the third quarter.

Meanwhile, in January 2023, GE introduced GE Healthcare and in April 2024, its renewable energy and power business GE Vernova.