GE Stockholder Lawsuit Settled for $19 Million

NEW YORK — General Electric Co. stockholders will accept $19 million to settle a class-action lawsuit that faulted Joseph Jett, a top bond trader for GE’s former Kidder, Peabody & Co. unit, for inflating Kidder’s net worth and deceiving shareholders about the value of GE stock, according to a settlement filed Wednesday.

Government regulators have called Jett’s fraud one of the largest in the history of the securities industry.

In the suit, investors claimed they overpaid for GE stock in 1993 and 1994 because Jett created phony profits that overstated Kidder’s financial performance by $350 million.

Jett later asserted that Kidder executives knew of his scheme but turned a blind eye because it fattened their bonuses as well.

The settlement provides that Kidder is liable for payment of $19 million to investors who owned GE stock in parts of 1993 and 1994.

Kidder denied wrongdoing and said it was ending the case “for the purpose of avoiding the continuing additional expense, inconvenience, distraction and risk of this litigation.”

Kidder exists only on paper now. GE sold Kidder’s main operations in 1994 to New York-based PaineWebber Group Inc.

Regulators said Jett exploited a glitch in Kidder’s software that credited him with illusory profits and recorded them in ledgers and regulatory reports.

But in a book he wrote last year, Jett said that everything he did was at the direction of a supervisor who sought to wrest control of Kidder from GE.

The supervisor, Edward Cerullo, answered the claim by filing a $10-million libel suit against Jett last August.