Published: Tuesday, 4 Aug 2009 | 11:30 AM ET

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CNBC parent General Electric was accused by the Securities and Exchange Commission of misleading investors in 2002 and 2003 by reporting "materially false and misleading results in its financial statements."

The SEC alleges that GE

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[GE  Loading...      ()   ] "used improper accounting methods to increase its reported earnings or revenues and avoid reporting negative financial results," according to a press release.

GE has agreed to pay a $50 million penalty, without admitting or denying the accusations, to settle the SEC’s civil suit.

“GE bent the accounting rules beyond the breaking point,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.

“Overly aggressive accounting can distort a company’s true financial condition and mislead investors.” David P. Bergers, Director of the SEC’s Boston Regional Office, added. “Every accounting decision at a company should be driven by a desire to get it right, not to achieve a particular business objective. GE misapplied the accounting rules to cast its financial results in a better light.”

The SEC found that GE's policies for accounting for hedging commercial paper and transactions at its rail unit were intentional violations of anti-fraud provisions of securities law.

Two other accounting irregularities, regarding how GE accounted for swap derivatives and for how it recorded profit on sales of spare parts for jet engines were negligent, but not intentional violations, the SEC found.

GE has previously corrected for the effects of these matters in its financial statements in SEC filings made between May 2005 and February 2008. Under the terms of the settlement, the company consented to the entry of a judgment requiring it to pay a civil penalty of $50 million and to comply with the federal securities laws.

GE issued the following statement regarding the settlement: "GE is committed to the highest standards of accounting. GE cooperated with the SEC over the course of its investigation, and GE and its Audit Committee conducted their own comprehensive review in conjunction with the investigation."

In the settlement, GE said the SEC has acknowledged the efforts made by GE's Audit Committee and senior management to address the issues arising during the course of this investigation and to implement appropriate remedial measures and control enhancements.

—Reuters contributed to this report.

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