By Jonathan Stempel
NEW YORK (Reuters) – general electricity (NYSE:), which does business as GE Aerospace, will pay $362.5 million in cash to settle a long-running lawsuit from shareholders who accuse it of hiding risks in its energy business, court documents show.
A preliminary settlement of the proposed class action lawsuit was filed Monday night in federal court in Manhattan.
It requires the approval of U.S. District Judge Jesse Furman, who in September 2023 refused to dismiss the case and warned that a trial would be “expensive and risky” for both sides.
Filed in 2017, the lawsuit concerned GE's reliance on factoring, or selling future revenue in exchange for cash, in connection with long-term service agreements at its GE Power unit.
Shareholders led by two pension funds – the Cleveland Bakers and Teamsters Pension Fund and Sweden's Sjunde AP-Fonden – said the energy unit became increasingly reliant on factoring to boost revenue, while sacrificing cash flows. futures.
They said the unit did not have enough contracts to factor, and GE's stock price fell after the company “caught” investors by surprise with billions of dollars of unexpected exposure.
The case covered alleged misleading disclosures between February 2016 and January 2018 by GE and former CFO Jeffrey Bornstein. Both denied wrongdoing in agreeing to settle.
Attorneys for the plaintiffs did not immediately respond to requests for comment Tuesday. GE and defense attorneys did not immediately respond to similar requests. Plaintiffs' attorneys can request up to 25% of the settlement fund as fees.
In January 2021, Furman dismissed separate fraud allegations related to a GE insurance portfolio and dismissed former CEO Jeffrey Immelt as a defendant.
A month earlier, GE paid $200 million to settle U.S. Securities and Exchange Commission allegations that it misled investors about its energy and insurance businesses.
Evendale, Ohio-based GE booked funding for Monday's deal in the third quarter.
It spun off its GE Healthcare healthcare business in January 2023 and its GE Vernova power and renewable energy business in April 2024.
The case is Sjunde AP Fonden et al v General Electric Co et al, United States District Court, Southern District of New York, No. 17-08457.
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