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.

michael_dell_2008.03.jpg
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

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,959.44 154.64 0.87%
Nasdaq 4,781.42 16.04 0.34%
S&P 500 2,078.54 7.89 0.38%
Treasuries 2.16 -0.01 -0.64%
Data as of 10:09pm ET
Company Price Change % Change
Gilead Sciences Inc 92.90 -15.55 -14.34%
Bank of America Corp... 17.71 0.09 0.51%
Apple Inc 112.94 1.16 1.04%
General Electric Co 25.71 0.09 0.35%
Facebook Inc 81.45 1.57 1.97%
Data as of 4:00pm ET

Sections

Private equity titan CEO David Rubenstein drops some rhymes in a holiday message to investors. More

Sure you could spend more this holiday, but your better bet is to put the money you save in your 401(k). More

So, North Korea's Internet went down. What is it like anyway? There are PlayStations, XBoxes and a MacBook. More

Unilever sued Hampton Creek over its egg-free mayonnaise spread Just Mayo. But the company behind Best Foods and Hellman's mayonnaise has now dropped the lawsuit. More

Retired union workers could see their pensions cut under a controversial new law, but many say they're not sure how they'll make ends meet if big cuts go through. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.