Legal watchdog investigates Dell sweeteners

Incensed over incentives

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A legal watchdog in North Carolina is challenging the state's corporate welfare sweeteners worth hundreds of millions of dollars to Dell.

The North Carolina Institute for Constitutional Law (NCICL) pledged to file a lawsuit against the computer maker and will hold a press conference tomorrow "to discuss litigation challenging the constitutionality of the economic subsidy packages granted to Dell by the State of North Carolina, the City of Winston-Salem, and Forsyth County." Such a lawsuit had been expected given the controversial nature of the relationship between Dell and North Carolina. State, city and county officials agreed to hand Dell some $280m in subsidies to bring 1,500 jobs and a new factory to the region.

Former state Supreme Court justice Robert Orr - now executive director of NCICL - will take the lead at tomorrow's conference outlining the charges against Dell. The central question appears to center around whether or not it's in North Carolina tax payers' best interests to help out Dell with such a lucrative deal.

"Every job for Dell is there for the purpose of making money for Dell," Orr told local paper the News & Record in a recent interview. "It's a real stretch to say that jobs are created for the public purpose."

Dells' incentive laden package includes tax credits for every computer and consumer device produced in the state. Tax payers will ensure that Dell receives a $15 per unit credit in 2006 and a $6.25 per unit credit from 2007 to 2019. To receive this perk, Dell must pay at least 50 per cent of the health care costs for its staff and not layoff more than 40 per cent of the workers. The average salary of a Dell worker at the new plant should be about $28,000.

In fiscal 2005, Dell saw its revenue surge 19 per cent to $49.2bn. Its goal is to reach $80bn in the next few years. Via ruthlessly efficient supply chain management, strong cost controls and above average marketing, Dell has managed to outpace its major hardware rivals in growth by a massive margin.

Dell has been one of the most aggressive embracers of offshoring operations to the third-world. In March, it reported that 55 per cent of its staff worked outside of the US and that its foreign staff was growing at quicker clip than the US side. India and El Salvador have arisen has two of Dell's favorite worker hideaways.

In January, an embarrassing set of documents exposed how hard North Carolina officials has to work to tempt Dell. For his effort, North Carolina Governor Mike Easley received an autographed copy of a book from Michael Dell. All citizens should be so lucky. ®

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