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Dell accused of hiding incriminating evidence in defect case

Dog-ate-our-email defense alleged

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Dell stands accused of deliberately hiding emails that showed its top executives in the mid-2000s knew the company was shipping millions of defective computers, one of its customers alleged in court filings Thursday.

Web hosting provider Advanced Internet Technologies, which alleges Dell knowingly sold computers that contained faulty components, said it knows that senior executives were aware of the problems. It cites a list of talking points that showed then-chief executive Kevin Rollins, founder Michael Dell, and others discussing ways to publicly address the malfunctions, which involved capacitor failures in Dell OptiPlex computers. AIT claims Dell is deliberating withholding the release of additional documents.

“Put simply, if Dell's Chairman and then-president and CEO were approving the messaging over the capacitor failures, it strains credulity that they would not have also been involved in the most important question of withholding, withdrawing, or purging of Dell OptiPlex computers from the marketplace because of those same problematic capacitors.”

Dell on Friday strenuously denied the allegation.

“We disagree with the contention that AIT has made and we'll be filing a response with the court soon,” Dell spokesman David Frink said. “We take all of our court orders and the obligation to comply with them very seriously. We also disagree with the basic nature of the lawsuit.”

According to evidence presented in court documents, capacitors from a company called Nichicon were included in millions of computers that shipped from 2003 to 2005. AIT claims the components were so faulty that they caused “failure rates approaching 100%” in the OptiPlex machines it purchased. An internal review by Dell itself found that 97 per cent of the machines were likely to fail over three years. The problems got worse when Dell managed to replace the faulty motherboards with other faulty ones.

The talking-points memo, which in addition to Rollins and Michael Dell was sent to 18 others, advises executives to play down the defects. It reads, in part:

Since this is not a safety issue and we are still scoping remediation plans as well as how to communicate with the sales teams — we recommend that we continue our reactive posture with the media (which includes blogs) using the following talking points:
  • We are aware of a quality issue related to capacitor failure in some Optiplex 270 models.
  • The problem poses no risk of safety or data loss for our customers.
  • We have been working with our customers to resolve problems in the most effective manner possible (which will vary depending on our customers' needs).
  • We're committed to fixing any systems that fail.

AIT lawyers said the memo was buried among “hundreds of thousands” of other documents produced by Dell. Because it seemed so random, “AIT suspected the document in question might have been altered in some way and even went so far as to retain a digital forensic consultant to examine the document.”

In an accompanying Exhibit filed in the case, the consultant told the court the only way to confirm the accuracy of the email is to examine the email boxes in native format.

Dell shipped some 11.8 million OptiPlex computers from May 2003 to July 2005 that included potentially faulty components. The machines were sold to business customers including Wal-Mart and Wells Fargo. AIT, which sued Dell in 2007, is seeking punitive damages for breach of contract. Dell has said the same problems affected other PC makers, and has extended the warranties of customers who bought defective machines. ®

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