GE sacks boss of Kidder Peabody

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The Independent Online
GENERAL ELECTRIC, hoping to lay to rest 'perceived issues' about the financial strength of its Kidder Peabody broking subsidiary, replaced Michael Carpenter, its chief executive, yesterday.

After insisting for two months that Mr Carpenter enjoyed his complete confidence, Jack Welch, GE's chief executive, said he would be 'stepping aside', and would be replaced as chairman by Dennis Dammerman, GE's finance director, and as chief executive by Denis Nayden, the second-ranking official at GE Capital.

Kidder and Mr Carpenter, 47, have been under siege since April when the firm accused its chief government securities trader, Joseph Jett, of fabricating dollars 350m (pounds 233m) worth of profits through 'phantom trading' in stripped Treasury bonds. More recently, reports have raised questions about the soundness of its huge mortgage-bond business, comparing Kidder's finances to those of Drexel Burnham Lambert shortly before its collapse in 1990.

But Mr Welch went out of his way to stress GE's commitment to Kidder. 'We believe the only problems at Kidder Peabody are issues related to Joseph Jett's government strips trading scheme,' he said. 'Kidder's fundamentals are strong and we intend to provide whatever financial and human resources are appropriate for the firm to realise its potential.'

Kidder none the less will lose another dollars 25m to dollars 30m after tax during the second quarter, on top of the dollars 210m after-tax charge it took in April to cover the alleged fraud. GE, America's largest and most profitable corporation, will report record second-quarter earnings of dollars 1.5bn in July, he said.

Mr Dammerman, who remains GE's senior vice-president and finance director, said there were inaccurate perceptions about Kidder's strength.

But Mr Welch, in comments over Kidder's internal public address system, went further, blaming the business press for Mr Carpenter's departure.

Mr Carpenter, a Briton who first joined GE in 1983, also spoke to Kidder employees yesterday morning, his voice breaking as he explained he was leaving 'to allow a new team to concentrate on running the strong set of businesses we have established'.

Mr Welch praised his five years as head of Kidder.