(Reuters) - General Electric Co (GE.N) agreed to pay $40 million to settle a shareholder lawsuit accusing the conglomerate of misleading investors about its health and exposure to risky debt during the 2008 financial crisis.
The lawsuit sought to hold GE, Chief Executive Jeffrey Immelt and Chief Financial Officer Keith Sherin responsible for investor losses in a six-month period when GE’s stock price fell as much as 77 percent, wiping out about $200 billion of market value.
Shareholders led by the State Universities Retirement System of Illinois accused the world’s largest maker of jet engines and electric turbines of hiding billions of dollars of troubled subprime and other loans at its GE Capital unit.
They also said the Fairfield, Connecticut-based company misled them about its ability to generate earnings and pay its dividend, and failed to make necessary disclosures when conducting an $12.2 billion stock offering in October 2008.
GE in March 2009 lost its “AAA” credit rating from Standard & Poor’s and cut its dividend 68 percent, its first reduction since 1938, despite having also received $3 billion from Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) (BRKb.N) in late 2008.
The settlement requires approval by U.S. District Judge Denise Cote, and was disclosed in a Monday night filing in Manhattan federal court.
GE is one of many companies to face private lawsuits over crisis-era disclosures. Many such lawsuits get dismissed, but U.S. District Judge Richard Holwell in January 2012 let parts of the GE case go forward. Holwell is now in private practice.
Seth Martin, a GE spokesman, said the settlement was “in the best interests of shareowners as we avoid diverting significant resources to a lawsuit that we believe is without merit.”
In court papers, lawyers at Berman DeValerio who represent the lead plaintiff called the settlement an “excellent” result, citing the uncertainty of litigation.
Joseph Tabacco, a Berman DeValerio partner, did not immediately respond on Tuesday to a request for comment.
The lawsuit seeks class-action status for shareholders who held GE common stock between September 25, 2008 and March 19, 2009.
GE shares bottomed at $5.87 on March 4, 2009, after beginning the class period at $25.68, Reuters data show.
The shares traded Tuesday morning down 2 cents at $22.25 on the New York Stock Exchange.
The case is In re: General Electric Co Securities Litigation, U.S. District Court, Southern District of New York, No. 09-01951.
Reporting by Jonathan Stempel in New York; Additional reporting by Nate Raymond; Editing by Maureen Bavdek, Nick Zieminski and Alden Bentley