Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Dell settles fraud charges for $100 million

By David Goldman, staff writer

NEW YORK (CNNMoney.com) -- Dell has agreed to pay $100 million to settle fraud charges from the Securities and Exchange Commission, the SEC announced on Thursday, ending a five-year old case that has plagued the company and its chief executive, Michael Dell.

The government regulator said Dell did not disclose to its investors "large exclusivity payments" that chipmaking giant Intel (INTC, Fortune 500) made to Dell in exchange for Dell's agreement not use chips made by rival chipmaker AMD (AMD, Fortune 500). The payments were so large that they made up 76% of Dell's operating income in the first quarter of 2007, and double-digit percentages of its earnings in several other quarters.

The SEC charges against Dell extend to CEO Michael Dell.

"It was these payments, rather than the company's management and operations, that allowed Dell to meet its earnings targets," the SEC said in a prepared statement.

The SEC also found that founder Michael Dell, along with several other high-ranking company executives, were complicit in the disclosure violations. Mr. Dell agreed to pay a $4 million settlement out of his own personal funds.

The company had acknowledged previously that Michael Dell was a target of the SEC's investigation, but the company's board said he would be allowed to continue as CEO and chairman of the board.

The government first launched an investigation into the computer giant in August 2005, alleging violations of securities laws, including fraud related to Dell's financial reporting and to its disclosures about its financial dealings with chipmaker Intel.

After an internal review that was completed in 2008, the company acknowledged accounting irregularities, and it adjusted its financial results from between 2003 and the first quarter of 2007.

Shares of Dell (DELL, Fortune 500) were unchanged after hours after rising by more than 2% during normal trading hours Thursday. To top of page

Index Last Change % Change
Dow 16,790.19 13.76 0.08%
Nasdaq 4,748.36 -32.90 -0.69%
S&P 500 1,979.92 -7.13 -0.36%
Treasuries 2.04 -0.02 -1.02%
Data as of 1:15am ET
Company Price Change % Change
General Electric Co 27.29 0.47 1.75%
Bank of America Corp... 15.69 0.00 0.00%
Alcoa Inc 10.98 0.57 5.48%
Freeport-McMoRan Inc... 11.83 0.65 5.81%
Micron Technology In... 18.22 0.65 3.70%
Data as of Oct 6


Yum Brands, the fast food holding company behind KFC, Pizza Hut and Taco Bell, dove 16% during extended trading. More

Pepsi reported a $1.4 billion loss in its business in Venezuela during the company's third quarter. Its profits were down 73% from the same time a year ago. More

For years, Microsoft has said that its Surface tablets would replace traditional laptops, but Tuesday it announced its first ever laptop: the Surface Book. More

Smarties, a Halloween candy staple, have been around for 66 years. Three Millennial women are revolutionizing it. More

The city council of the District of Columbia is weighing a new proposal that would mandate up to 16 weeks of paid family leave for family bonding or a serious personal or family medical issue. More