"Be suspicious," was John Stossel's reaction to yesterday's Washington Post op-ed piece by the chief executive of General Electric, Jeffrey Immelt, calling for spending more federal money on "clean energy" research, development, and deployment. Mr. Stossel turned out to be prescient; today, the Securities and Exchange Commission announced that it filed and settled civil fraud charges against GE, and the company agreed to pay a $50 million penalty to settle the matter with the SEC. I called David Bergers, the regional director of the SEC's Boston office, and Mr. Bergers told me the $50 million goes right to the general federal Treasury, not to the SEC's budget. I asked why the money should go to the federal government rather than to particular individuals who bought or decided not to buy GE stock based on what the government says were improper accounting methods. Mr. Berger told me that the SEC does distribute money to individuals in some cases, but avoids it in cases where the cost of identifying individuals and distributing the money would dwarf the amount of the settlement.
Two points: One, a lot of the people misled by the supposedly improper accounting were long-term GE shareholders. Taking $50 million that belongs to those shareholders and giving it to rest of the people of the United States, many of whom never owned GE and never considered owning it, seems a flawed way of rectifying an accounting error. Those punished end up being exactly the ones who were allegedly defrauded.
Second, GE is subject to a lot of federal regulation, including by the SEC. If a chief executive wants to ingratiate himself or his company with the Obama administration, what better way to do it than by campaigning for one of the administration's goals, clean energy? Also, which would you rather be publicly known as, an accounting fraud or a campaigner for "clean energy"? "Be suspicious," indeed.
What's more, with a $50 million SEC investigation bearing down, what do you think Mr. Immelt is going to say when, as the Washington Post reports, White House chief of staff Rahm Emanuel telephoned Mr. Immelt personally to ask for a piece of prime time for the president to help sell his health-care initiative? The whole situation, from start to finish, shows the awkward situations created by the federal government's high involvement in the private economy. And we haven't even gotten to GE's role as a defense contractor or as a supplier of medical technology that would be affected by Obama-care.
