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What ‘Lights Out’ gets wrong about GE

July 21, 2020, 7:58 PM UTC
Lights Out-Book
Courtesy of Houghton Mifflin

The book Lights Out, written by Wall Street Journal reporters Thomas Gryta and Ted Mann, and which Fortune recently excerpted, gets some critical things wrong about General Electric and its former CEO, Jeff Immelt. I know—I was there.

But one of those mistakes deserves direct refutation. In their chapter focused on the events of the global financial crisis in September and October 2008, the authors erroneously assert that GE knew it was having problems issuing short-term debt—or commercial paper—but did not communicate that information to investors.

They write: “On Sept. 14, a Sunday, GE’s investor relations department issued a letter reiterating that the company was in healthy condition and maintaining that its commercial paper programs continued to be ‘robust’ and that ‘we are not raising external capital and have no need to.’

“But the very next day, Immelt showed up at [former Treasury Secretary Hank] Paulson’s office in the evening to again sound the alarm about potential problems at GE. He told the Treasury Secretary that the commercial paper operation was getting worse and that GE was having a hard time selling debt that lasted longer than overnight.”

The paragraph immediately above is completely untrue. Immelt’s meeting with Paulson was about tax reform, not GE’s ability to roll short-term paper. GE was having no problem issuing commercial paper at the time of the meeting with Paulson.

Lights Out’s apparent source for its misinformation seems to be Paulson’s book on the financial crisis, which indeed puts the meeting with Immelt in September. But Paulson acknowledges in his book that he based his recollections of conversations on calendar entries and telephone logs that did not record subject matters and, in view of all that was happening at the time, it’s understandable he got the dates wrong. GE told journalists when Paulson’s book came out in 2010 that he had the wrong dates for his meeting with Immelt.

Paulson was actually referring to conversations in October 2008 when Immelt was discussing with him and others (e.g. Sheila Bair, then the chair of the U.S. Federal Deposit Insurance Corp.) the difficulties that the U.S. government had inadvertently caused for GE by initially excluding the company from the Temporary Liquidity Guarantee Program, or TLGP. That would have left GE as one of the few issuers whose debt was not guaranteed by the government. This decision was later reversed.

Based on Paulson’s book, the U.S. Securities and Exchange Commission launched a thorough investigation of GE’s disclosures during that period. The SEC closed the investigation without taking any action against GE.

It should be noted that the Lights Out authors never asked Immelt about this serious and erroneous assertion about GE’s disclosures despite opportunities to do so during a three-hour interview in December 2018.

Another item from the chapter further illustrates issues with Lights Out. The authors write that on Sept. 11, 2008, Immelt had dinner at a fancy Hollywood restaurant with director Steven Spielberg, Universal Studios president Ron Meyer (GE owned NBCUniversal at the time), and Stacey Snider, then the CEO of DreamWorks. This never happened, even though the entertainment gossip site Deadline reported otherwise. Immelt was in Los Angeles for meetings with GE’s corporate audit staff, investors, and NBC executives—none of which were held at a fancy Hollywood restaurant. The night of the 11th, he had dinner with the GE audit staff.

Sheffer is the former head of communications at GE and today a consultant to Jeff Immelt.