Lawsuit claims Dell hid Intel kickbacks (and another alleges insider trading)

[UpInArms]

http://business.timesonline.co.uk/article/0,,9075-2580956,00.html

Dell has been hit with a lawsuit accusing the embattled computer group of improper accounting relating to hundreds of millions of dollars in rebates it allegedly received from Intel, the world's largest computer chip maker.

The lawsuit claims that Dell received as much as $1 billion (£509 billion) a year in "secret and likely illegal" kickbacks from Intel, which were paid to ensure that the computer maker did not use other chip suppliers, The Wall Street Journal reported.

The lawsuit, filed on Wednesday night at the US District Court in Austin, Texas, alleges that the payments were not properly accounted for or disclosed, and that they inflated Dell’s earnings.

The allegations come days after Michael Dell, the company's founder, returned to the role of chief executive, replacing Kevin Rollins, following a string of dismal earnings reports.

Both Mr Dell and Mr Rollins are named in the lawsuit, The Wall Street Journal said, alongside Dell’s auditors, PricewaterhouseCoopers.

...more...

and here's the two-fer

Dell suit alleges widespread insider trading

http://www.marketwatch.com/news/story/new-dell-lawsuit-latest-issue/story.aspx?guid=%7BB44113E0-6194-4F5C-84E7-70033AAB3321%7D

SAN FRANCISCO (MarketWatch) -- If Michael Dell thought he would get a warm and easy welcome back as Dell Inc.'s chief executive, the events of Friday showed that restoring investor confidence and competing against a revitalized Hewlett-Packard Co. are just the beginning of a litany of dramas that the company founder faces.

Allegations of widespread insider trading by several Dell (DELL) executives, including Dell and former CEO Kevin Rollins, were at the core of an amended complaint to a lawsuit filed against Dell on Jan. 31 in the U.S. District Court in Austin, Texas. The complaint added to a lawsuit originally filed against Dell on Sept. 13, 2006.

The class-action lawsuit alleges that several Dell executives "made a series of false and misleading statements" about the viability of Dell's business model and the company's ability to grow its profits and revenue from February 2003 to September 2006.

It also alleges Dell was dependent on billion-dollar "kickbacks" from Intel Corp. that were secret and possibly illegal. The complaint further contends the misconduct involved "the largest insider bail-out in the history of any U.S. public company."

The sixteen defendants listed in the complaint include Dell, Rollins, former Chief Financial Officer Jim Schneider, and board member and current CFO Donald Carty, who replaced Schneider a couple months ago. Also included in the suit were Dell as a company, Dell's accountants, PricewaterhouseCoopers LLP, and Intel Corp. (INTC).

The class action suit was filed by the San Diego-based law firm of Lerach Coughlin Stoia Geller Rudman & Rolling LLP. The firm is run by Bill Lerach, who augmented his fame during the Enron scandal when he was pictured carrying a box of shredded documents.

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[redqueen]

1. Hah.

Dirty business everywhere...

[kenny blankenship]

2. This has been "known" or treated as common knowledge for so long

I didn't know it was even illegal.

[DainBramaged]

3. I worked for a large Japanese corporation in the early Nineties

And they regularly gave out huge million dollar kickbacks to large dealers in the form of MDF or Market Development Funds which were supposed to be for "advertising" but were for the bottom line since they couldn't offer a lower price to only one dealer and not the rest.

[Robbien]

4. Such dirty deals being done on a regular basis

When a company gets sued I wonder not about the company but about the competition. I assume Dell is in court because it pissed some other company off or it was a threat to some BigMoney deal in the works.

[Vidar]

5. I'm glad to see Dell charged, but this still pales beside Microsoft.

[reprobate]

6. What's the big deal? That's how capitalism works.

If you don't show a larger profit this quarter than you did last quarter, you're out.

Doesn't matter HOW you do it, just so long as you don't get caught.

Let me reiterate, living with corporations is like swimming with sharks. You want to keep a good eye on them, and you need to be able to kill them when they turn on you. Which they will. Like the scorpion in the old fable, it just their nature.