Kickback payback
Dell has been hit with a $100m fine for using accountancy trickery between 2002 and 2006 to make it look like it was meeting its earnings targets while it was allegedly relying on Intel rebates.
The Securities and Exchange Commission (SEC) dished out a $100m fine for Dell's dealings, while its founder and CEO, Michael Dell, agreed to shell out an extra $4m. However, the firm settled the case without admitting or denying the SEC's allegations.
Robert Khuzami, director of the SEC's Division of Enforcement, said: "Accuracy and completeness are the touchstones of public company disclosure under the federal securities laws. Michael Dell and other senior Dell executives fell short of that standard repeatedly over many years, and today they are held accountable."
As well as the hefty fine, the SEC released communications between Dell and Intel showing the nature of the deals where investors were not informed of the exclusive relationship.
Central to the SEC's complaint against Dell was the company's move to hide its dependence on rebates from Intel, from its investors. The chip manufacturer rewarded Dell for shunning alternative chips, which were said to be cheaper and faster at the time. Dell's competitors were mostly using Advanced Micro Devices (AMD) chips, while Dell reportedly refused to ship servers with AMD chips inside. Dell's execs told investors lntel had some innovative products lined up and another supplier would complicate Dell's supply chain.
However, the SEC said Dell became reliant on Intel's exclusivity payments to meet the financial targets set for every quarter and investors were not made aware of the situation.
Christopher Conte, associate director of the SEC's Division of Enforcement, said: "Dell manipulated its accounting over an extended period to project financial results that the company wished it had achieved, but could not. 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."
