GE says it may face U.S. action over subprime mortgage
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[February 24, 2018]
By Alwyn Scott
NEW YORK (Reuters) - General Electric Co
<GE.N> faces potential legal action by the U.S. Department of Justice
over allegations that its GE Capital unit and now-defunct WMC Mortgage
Corp unit violated U.S. law in connection with subprime mortgages,
according to a regulatory filing on Friday.
The DOJ "is likely to assert" violation of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (FIRREA) "in connection
with WMC's origination and sale of subprime mortgage loans in 2006 and
2007," the filing said.
"WMC and GE Capital will explore whether an acceptable settlement of
this matter can be reached. In the event that an acceptable settlement
cannot be reached, DOJ may initiate legal proceedings against WMC and GE
Capital. WMC and GE Capital believe they would have defenses to any such
lawsuit," GE's 10-K filing added.
GE said the warning about the potential action stems from a DOJ
investigation and outcomes of investigations of other financial firms.
GE said two years ago that the DOJ had issued subpoenas to WMC and GE
Capital as part of an industry-wide investigation.
WMC, now a defunct subprime lending unit, was sold by GE in 2007.
GE declined to elaborate beyond the language in the filing.
The Boston-based conglomerate also said in the filing that it added
18,000 employees to its worldwide workforce last year, a 6.1 percent
increase that comes as it tries to cut costs to raise profits.
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The General Electric logo is pictured on the General Electric
offshore wind turbine plant in Montoir-de-Bretagne, near
Saint-Nazaire, western France, November 21, 2016. REUTERS/Stephane
GE said it had 313,000 employees at year-end, including 106,000 in the United
The increase stemmed from acquisitions made last year, including Baker Hughes
<BHGE.N> and LM Wind Power, and was "offset by divestitures and restructuring,"
GE spokeswoman Jennifer Erickson said.
"The headcount figures at the end of 2017 do not reflect all of the
restructuring that we've announced previously," she added. "Some of the
restructuring projects take time to execute, so we'll continue to reduce
headcount as we go forward."
GE said it had the ability to repatriate approximately $10 billion of non-U.S.
cash without incremental federal income tax because of recent U.S. tax law
Last month, GE posted nearly a $10 billion loss for the fourth quarter of 2017.
Analysts said on Friday that they had expected GE's headcount to fall as the
company cuts costs, and were looking for updates to the WMC investigation.
(Reporting by Alwyn Scott, Shravanth V and Karina Dsouza; Editing by Cynthia
Osterman and Rosalba O'Brien)
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