Edward Gormbley v. General Electric Capital Services, Inc.
FORMER ASSISTANT VICE PRESIDENT OF GE CAPITAL
FILES $10 MILLION LAWSUIT AFTER BEING PUNISHED FOR REVEALING FRAUD
(Sept 8, 2010, Stamford, CT) – Edward Gormbley, a former Assistant Vice President at General Electric Capital Services filed suit in Connecticut Superior Court today seeking $10 Million from GE. Mr. Gormbley’s complaint asserts that GE Capital retaliated and constructively discharged him after he complained that GE Capital fraudulently overvalued one of its largest investment assets, Momentive Performance Materials (“Momentive”).
Gormbley, a “Top-Talent” employee of GE, filed the Complaint after the Company cut his compensation, reduced his responsibilities and destroyed his professional reputation after he repeatedly expressed legitimate concerns to his superiors that GE Capital’s valuation methods resulted in a grossly inflated valuation of Momentive in 2008.
Gormbley is represented in the matter by Sanford Wittels & Heisler LLP, in Washington, D.C.
“Mr. Gormbley repeatedly was warned to keep what he knew about GE Capital’s valuation of Momentive to himself,” said David Sanford. “When Gormbley refused to play GE’s games, GE swiftly and brutally retaliated against him.”
In addition to GE Capital Services, the suit names General Electric Company, GE Equity, GE Company Chair and CEO Jeffrey Immelt, and a number of other high-ranking corporate executives as defendants.
Gormbley was hired by GE in 2000, joining its Financial Management Program. After working in a wide range of divisions throughout the company, he joined GE Commercial Finance, a subdivision of GE Capital in 2006. Throughout his rise through the ranks, he earned and maintained a spot on the top rung of the company’s forced ranking system. His strong, positive performance also won him a coveted position on GE’s corporate audit staff.
In mid-2008, Gormbley became concerned because he recognized that GE’s valuation of Momentive was inflated by some $2 billion. He shared these conclusions with his superiors. They were not appreciative.
GE’s first response to Gormbley’s bad news was to ignore the message. When Gormbley persisted in making his concerns known to an increasing circle of individuals in the company, GE’s answer was to kill the messenger.
In early October 2008, while the financial sector was in a state of turmoil, GE announced a $12 billion stock offering, touting the company’s financial soundness and pledging to maintain its high quarterly dividend. Yet, at the same time, it was becoming increasingly clear that GE Capital was in trouble. In fact, in private meetings with Bush administration Treasury Department officials, including then-Treasury Secretary Henry Paulson, Immelt expressed concerns about GE and GE Capital’s finances and financial stability.
In November and December 2008, Gormbley continued to warn GE about Momentive’s declining performance and recommended that GE Equity take a write down of Momentive’s valuation. Gormbley was explicitly and implicitly warned to stop talking about Momentive’s decline and its effects on GE. Gormbley’s superiors instructed him to change his valuation methodologies for Momentive calculations and to stop “making things so difficult.”
In January of 2009 Gormbley’s concerns about GE’s over-valuation of Momentive were confirmed. At that time, GE Equity received Momentive’s board book verifying that the value of Momentive had plummeted. With this written corroboration of his concerns, Mr. Gormbley sent an email to the President of GE Capital and other senior GE officials in which he again advocated a write-down of Momentive. In response, GE chastised Mr. Gormbley for making the situation public and discouraged him from speaking at meetings.
But Gormbley would not stay silent. He had witnessed and objected to GE Capital’s overstatement of Momentive’s value and its concealment and misrepresentation of faulty valuation data to internal controllers, external auditors, and the Securities and Exchange Commission. In its February 2009 Form 10-K filing, GE chose not to include the most updated valuation information for Momentive, thereby violating the SEC’s reporting requirements.
In response, GE Equity’s leadership initiated a campaign of retaliation that ended Gormbley’s career at the company and caused him severe financial and emotional harm. The retaliation included removing him from a team of energy investment professionals, prohibiting him from pursuing new deals, passing him over as a board observer on an investment deal in which he has served as lead underwriter, reducing his performance rating, cutting his year-end bonus, removing him from the Momentive account, excluding him from meetings essential to his performance, delaying his 2009 performance review, refusing him the opportunity to work from home or utilize flex time, and threatening to revoke a $133,000 loan.
“GE did everything it could possibly do to discredit me, ruin my reputation within the company and generally make my life miserable,” said Gormbley. “When I asked Human Resources to investigate the retaliation I was being regularly subjected to, my requests were ignored. To preserve my professional reputation and financial security, I finally had to resign.”
The Complaint calculates damages at over $10 million.