General Electric Co. (NYSE: GE)’s Capital Service unit has been sued by a former executive who claims he was forced out of the company for questioning the company’s accounting practices of a certain asset which he believed was over-valued on G.E.’s books.
The executive, Edward Gormbley, worked for General Electric from 2000 until September 2009 when he quit the company. Gormbley filed suit against G.E. and its CEO Jeffrey Immelt in a state-court in Stamford, CT.
Gormbley accuses G.E. of being punished for challenging the valuation of one of General Electric Co. (NYSE: GE)’s investment assets, silicon-maker Momentive Performance Materials. He said that G.E. had over-valued Momentive to improve its balance sheet, and that if G.E. had properly valued Momentive, “GE Capital’s earnings [would be reduced by] 100 percent.” The complaint said that if G.E. had properly valued the asset, its fourth quarter earnings would have been reduced.
As a result, Gormbley said that repsonsibilities were taken away from him and that he was downgraded in employee valuations and that his annual bonus was slashed, forcing him out of the company. He is seeking $10 million in damages.
“The allegations in Mr. Gormbley’s complaint are meritless,” said Russell Wilkerson, a spokesman for G.E. in an emailed statement to Bloomberg. “The company will vigorously defend itself against these baseless assertions.” He added that G.E. “correctly accounted” for its investment in Momentive during the company’s ownership of the silicon manufacturer.
General Electric sold the unit, formerly known as GE Advanced Materials, to Apollo Management LP for $3.8 billion in 2008, but the company’s Capital Service unit retained a 10% interest in the maker and had $400 million in the company’s debts.
General Electric Company (GE) is a diversified technology, media and financial services company. The Company’s products and services include aircraft engines, power generation, water processing, security technology, medical imaging, business and consumer financing, media content and industrial products. The Company serves customers in more than 100 countries. The Company operates through five segments: Energy Infrastructure, Technology Infrastructure, NBC Universal (NBCU), Capital Finance and Consumer & Industrial. In March 2009, Teleflex Incorporated completed the sale of its 51% share of Airfoil Technologies International – Singapore Pte. Ltd., to GE. In September 2009, the Company sold its 81% interest in Homeland Protection business to Safran SA. In September 2009, the Company acquired ScanWind. In September 2009, Moog Inc. completed the acquisition of the Company’s GE Aviation Systems’ flight control actuation business. In November 2009, GE Aviation acquired Naverus, Inc.
Shares of General Electric Co. (NYSE: GE) traded up 0.44% on Friday, ending the week at $15.98.
