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General Electric in $49 million settlement over Petters fraud

General Electric in $49 million settlement over Petters fraud
FILE PHOTO: The logo of U.S. conglomerate General Electric is pictured at the company's site of its energy branch in Belfort, France, February 5, 2019. REUTERS/Vincent Kessler/File Photo   -   Copyright  Vincent Kessler(Reuters)
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(Reuters) – General Electric Co has reached a $49 million (37 million pounds) settlement to end a long-running lawsuit over its relationship with Thomas Petters, the Minnesota businessman serving a 50-year prison term for running a multibillion-dollar Ponzi scheme.

The settlement between GE and a trustee for two bankrupt Florida investment funds known as Palm Beach Finance was disclosed in a Tuesday filing with the federal bankruptcy court in West Palm Beach, Florida.

GE denied liability in agreeing to settle. It did not immediately respond to requests for comment.

The accord removes a potential financial overhang for Boston-based GE, which is trying to cut costs while projecting lower 2019 cash flow and profitability from its core industrial operations. GE lost $22.8 billion and slashed its dividend in 2018.

Petters, 61, was convicted in December 2009 on 20 counts including fraud and money laundering, over what prosecutors called a $3.65 billion fraud.

Prosecutors said Petters bilked investors who thought he was using their money to buy consumer electronics from wholesalers and resell them to big-box retailers such as Costco Wholesale Corp and Walmart Inc’s Sam’s Club.

Federal authorities raided Petters’ offices in September 2008 and criminally charged him that December, the same month Bernard Madoff was charged with running his own Ponzi scheme.

Barry Mukamal, the trustee for the Palm Beach Finance funds, which claimed to suffer more than $1 billion of damages, accused General Electric Capital Corp, one of Petters’ lenders, of knowing as early as 2000 about the fraud, but keeping quiet to ensure Petters would keep paying its fees.

(Reporting by Jonathan Stempel in New York; editing by Phil Berlowitz and Susan Thomas)

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