Michael Dell agrees to pay £2.6m to settle SEC charges
Friday 23 July 2010
Michael Dell, the founder of the computer manufacturer that bears his surname, is personally paying $4m (£2.6m) to settle charges that he misled investors by hiding the real source of Dell's profits over several years in the last decade.
The entrepreneur, along with two of his most senior former lieutenants, was charged by the Securities and Exchange Commission, the US stock market regulator, with violating disclosure rules when Dell was relying heavily on secret rebate payments from Intel, the maker of computer chips, to meet Wall Street profit forecasts.
Kevin Rollins, a former chief executive, and James Schneider, a former chief financial officer, will pay $4m and $3m respectively, while the company itself is also paying $100m to settle the fraud charges against it. Dell had disclosed a provision for the settlement in its last financial results.
The SEC says that all of Dell's financial results between 2002 and 2006 were tainted by the deception, first because Mr Dell and his lieutenants failed to disclose the company's reliance on Intel's rebates, and then by failing to explain the real cause of the profit warnings that ensued when the rebates stopped.
"Dell manipulated its accounting over an extended period to project financial results that the company wished it had achieved but could not," said Christopher Conte, associate director of the SEC's enforcement division. "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."
Robert Khuzami, the director of the enforcement division, 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."
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