Feeds

Dell pays $100m to settle accounting fraud charges

Michael Dell pays $4m

  • alert
  • submit to reddit

SANS - Survey on application security programs

Dell has agreed to pay $100 million to settle US Security and Exchange Commission charges that it failed to disclose information to investors and used fraudulent accounting practices to give the false impression it was meeting Wall Street earnings targets.

Separately, Michael Dell – the company's founder, chairman, and CEO – agreed to pay $4m to settle charges that he played a role in the disclosure violations.

Last month, the company set aside $100 million from its first quarter profits as a potential settlement, and it said that Michael Dell was discussing a separate settlement.

The SEC also charged former CEO Kevin Rollins and former CFO James Schneider with disclosure violations, and it charged Schneider, former regional vice president of finance Nicholas Dunning, and former assistant controller Leslie Jackson with violations related to improper accounting.

Like Dell, Rollins agreed to pay a $4 million fine, and Schneider agreed to pay $3 million. Dunning and Jackson also agreed to settle.

"Dell manipulated its accounting over an extended period to project financial results that the company wished it had achieved, but could not," reads a canned statement from Christopher Conte, associate director of the SEC’s division of enforcement. "Dell was only able to meet Wall Street targets consistently during this period by breaking the rules. The financial results that public companies communicate to the investing public must reflect reality."

The SEC launched its investigation into the company in 2005, and the next year, Dell announced that the company had launched an internal investigation into its accounting and financial-reporting practices. Then, in 2007, the company said it had manipulated financial results between 2003 and 2006 and announced that income during that period would be reduced by between $50m and $150m. The original figure was $12bn.

The SEC complaint alleges that Dell did not disclose large payments the company received from Intel to not use CPUs manufactured by rival AMD. And after Intel stopped the payments, the complaint says, Dell misled investors by failing to disclose why its profits had dropped.

Without the Intel payments, the complaint says, Dell would have missed consensus analyst EPS estimates in every quarter from 2002 through 2006. According to the complaint, the payments grew from 10 per cent of Dell’s operating income in 2003 to 38 per cent in 2006. The payments peaked in 2007 at 76 per cent.

The complaint says that Intel cut the payments in the second quarter of 2007 after Dell said it would start using AMD chips and that Michael Dell, Rollins, and Schneider told investors that the company’s profits had dropped because it had set prices too high as demand slowed.

The company settled without admitting or denying the SEC's charges. ®

High performance access to file storage

More from The Register

next story
Sorry London, Europe's top tech city is Munich
New 'Atlas of ICT Activity' finds innovation isn't happening at Silicon Roundabout
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
It may be ILLEGAL to run Heartbleed health checks – IT lawyer
Do the right thing, earn up to 10 years in clink
prev story

Whitepapers

Designing a defence for mobile apps
In this whitepaper learn the various considerations for defending mobile applications; from the mobile application architecture itself to the myriad testing technologies needed to properly assess mobile applications risk.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.