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Sometimes general counsel has to be the kid with a finger in the dike.
It may not stop the inevitable, but at least people will tell a good story about you. That's what the attorneys may feel like when it's all over at General Electric Co.
The company reported a $15 billion hole in its financials last month, and the repercussions are deep. Now the attorneys are scrambling for cover.
According to Bloomberg, the story started 14 years ago. The company took on some long-term risk that got worse over time.
In 2004, GE created an insurance unit through a stock offering. Genworth Financial, Inc. provided long-term care insurance, but started to post large losses several years ago.
Those losses caught up with the parent company, and the dam broke in public disclosures in January. Everybody who was watching -- stockholders, analysts, and regulators -- was shocked.
"It's hard to imagine a $15 billion problem materialized in the course of the year," said Jeff Sprague of Vertical Research Partners.
Money reports that GE's legal troubles are mounting. Put another way, lawsuits are cascading down the mountain.
JP Morgan estimates the company faces more than $9.2 billion in damages claims. That doesn't include shareholder lawsuits and potential fines from the Securities and Exchange Commission.
Shareholders have already sued the company and its principal officers, alleging breaches of fiduciary duties and unjust enrichment. The SEC is investigating the company's accounting; the last time, it cost the company $50 million in fines.
Then there's the old problem with GE Capital, the lending business that nearly ruined the company during the nationwide financial crisis. That hole still hasn't been stopped, but the company reportedly has set aside $400 million to cover it.
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