GE, 800 Pound Gorilla
"We are GE — the 800 pound gorilla — we can do whatever we want."
That's a quote that an executive in GE's healthcare finance business used while negotiating with the operators of nursing homes in Louisiana and Texas that were financed with tens of millions from GE, according to a lawsuit filed earlier this month in federal court in the Southern District of New York by the nursing home operators.
The suit also claims that the executive, Richard Arrowsmith, who is based at a GE office in Bethesda, Md., required the nursing-home operators to reimburse his expenses – "including his accommodations at the Ritz-Carlton Hotel" — when he traveled to New York to meet with them.
General Electric is rejecting the lawsuit as groundless. The managing director of communications and public affairs at GE Capital, Russell Wilkerson, told me, "Our policy is not to comment on legal matters, but I will say in this case that specifically the case is baseless, the charges are false and egregious."
In a press release announcing the suit, the lawyers bringing the complaint accuse GE of racial and religious discrimination against two Jewish-American businessmen, Albert and Harris Schwartzberg, whose companies owned and operated the nursing homes and assisted living facilities financed with a $44 million term loan and a $22 million operating loan in which GE eventually took a lead role (it was originated by Merrill Lynch.)
Whether Jews are a "race" for the purpose of discrimination law is an interesting legal question, as is the relevance to the matter of a certain Harold Noel Arrowsmith Jr. The lawsuit describes Harold Noel Arrowsmith as "the most notorious and aggressive anti-Semite in our country's history," a co-founder of the "National Committee to Free America from Jewish Domination," and a financial backer of the American Nazi Party, though when UPI described Harold Noel Arrowsmith Jr. as a financier of anti-Semitism, he sued for libel. The suit against GE claims, "the anti-Semitism in the Arrowsmith clan did not stop with Harold Noel Arrowsmith, but runs through Richard Arrowsmith as well." Richard Arrowsmith did not return a voicemail message left at his GE office.
Racial or religious discrimination in lending is illegal; arrogance is not. Nor should it be. A certain amount of bluster is to be expected in business negotiations, and anyone who borrows $66 million can chalk up a certain amount of boastfulness from his lender, along with the interest payments, as part of the cost of capital.
Yet this may be one of those cases in which the legal question to be decided by the court, turning on the racial or religious discrimination in lending, is actually the less interesting part. What GE has to reckon with is the court of public opinion, where the sense of entitlement conveyed by the "We are GE — the 800 pound gorilla — we can do whatever we want" quote, along with the Ritz-Carlton stays, may well ring true no matter how much GE denies it.
This is a company, after all, whose CEO, Jeffrey Immelt, has received around $90 million in salary, cash and pension benefits while his company has lost $100 billion, or about a third, of its market value. Mr. Immelt was also until recently a director of the Federal Reserve Bank of New York, and he is chairman of the President's Council on Jobs and Competitiveness. Oh, and while GE was squeezing the Schwartzbergs on their debt, GE's own debt was backed, up to $139 billion, by the Federal Deposit Insurance Corporation's Temporary Liquidity Guaranty Program. All this while the company was erecting signs in New York explaining "GE Means Government," and while it was training Chinese Communist Party officials.
Doubtless GE has many excellent and dedicated employees creating real value for customers. I'm generally litigation-averse. But if this suit sheds some more public light on the inner workings of the 800-pound gorilla, well, it might not be the worst thing.
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