Computer maker Dell Inc. is paying $100 million to settle civil charges that it fraudulently used payments from Intel to pump up its profits to meet Wall Street targets over five years, the government announced Thursday.
Under the settlement with the Securities and Exchange Commission, company Chairman and CEO Michael Dell also agreed to pay a separate $4 million civil penalty.
The settlement culminated a five-year investigation by the agency. While the $100 million fine was far from the largest penalty levied by the SEC, the decision to charge a sitting chief executive of a major company and reach a seven-figure settlement with him is rare. Founder Michael Dell is one of the most prominent figures in the technology industry, credited for revolutionizing the PC market by making the computers cheap and widely accessible.
The SEC had accused Michael Dell, former CEO Kevin Rollins and former Chief Financial Officer James Schneider of playing a role in the company’s alleged violations of disclosure laws. Schneider and two other former executives were charged with taking part in the alleged fraudulent accounting.
Dell, based in Round Rock, Texas, is the world’s third-largest PC maker behind Hewlett-Packard Co. and Taiwan’s Acer Inc. The company’s net income was $441 million in its fiscal first quarter this year, which ran from February through April.
The SEC said the company also failed to disclose to investors large payments it received from Intel Corp. in exchange for not using central processing units made by Intel’s main rival, Advanced Micro Devices Inc. Those payments enabled Dell to meet its quarterly earnings targets, the agency said. After Intel stopped the payments, Dell again misled shareholders by not disclosing the real reason its profits had dropped, according to the SEC. Read the rest of this entry »
