NYT: GE, Tesla, Snapchat, under accounting investigations
Companies that lag their peers sometimes cut accounting corners to make themselves appear stronger than they really are. But is the risk of getting caught worth it?
The recent news that the Justice Department and Securities and Exchange Commission are looking at the accounting and disclosures of General Electric, Tesla and Snap does not bode well for the companies. An investigation of possibly faulty accounting typically looks deep into corporate books and public statements, and the government rarely commits resources without evidence that there may be significant misstatements.
Regulators are suspicious.
G.E. has been under scrutiny since January for an insurance charge totaling $15 billion over seven years related to long-term care and other policies. In October, the company announced a $22 billion accounting charge to write down the value of its power business. A division rarely loses that much value overnight. The S.E.C. and Justice Department expanded their investigations to include the latest charge, most likely to determine whether G.E. delayed recognizing such a sizable hit in the hope its fortunes would improve and allow it to avoid dealing with the problems.
Tesla already settled a securities fraud lawsuit with the S.E.C. over improper tweets by Elon Musk, its chief executive, about potentially taking the company private. That case revealed a broader investigation of the company about how it forecast production of its Model 3 sedan in 2017, including disclosure that the S.E.C. issued a subpoena about production rate projections for the vehicle.
Snap disclosed that the S.E.C. and Justice Department sent it subpoenas for records related to its disclosure about competition from Instagram when it went public in March 2017. Regulators are investigating whether the company understated the impact of Instagram on its own growth — a key issue for investors in a tech company built around rapid user growth.