Dell paying $100M to settle SEC accounting fraud charges; CEO Michael Dell paying $4 million

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Dell paying $100 million in SEC deal

WASHINGTON — Computer maker Dell Inc. is paying $100 million to settle civil charges that it used fraudulent accounting to meet Wall Street earnings targets, the government announced Thursday.

Under the settlement with the Securities and Exchange Commission, company Chairman and CEO Michael Dell also agreed to pay a separate $4 million civil penalty.

While the fine was far from the largest penalty levied by the SEC, the decision to charge a sitting chief executive of a major company and reach a seven-figure settlement with him is rare. Michael Dell is one of the most prominent figures in the technology industry, credited for revolutionizing the PC market by making the computers cheap and accessible.

The SEC said the company also failed to disclose to investors large payments it received from Intel Corp. in exchange for not using equipment made by Intel’s main rival, Advanced Micro Devices Inc. Those payments enabled Dell to meet its quarterly earnings targets. After Intel stopped the payments, Dell again misled shareholders by not disclosing the real reason its profits had dropped, the SEC said.

Michael Dell and four former executives falsely portrayed the means by which the company met earnings targets from 2002 through 2006, the SEC said in the lawsuit. Without the payments from Intel, the agency said, Dell would have missed analysts’ estimates in every quarter during that time.

The company and Michael Dell neither admitted nor denied wrongdoing. But they did agree to refrain from future violations of the securities laws. The company also agreed to improve its disclosure process by hiring an outside consultant and expanding its training of employees.

The SEC also named former Dell CEO Kevin Rollins, former Chief Financial Officer James Schneider, former regional Vice President of Finance Nicholas Dunning and former Assistant Controller Leslie Jackson in the suit.

Rollins agreed to pay a $4 million civil penalty. Schneider is paying a $3 million penalty as well as $83,096 in restitution and $38,640 in interest. Dunning is paying a $50,000 penalty.

The SEC said its investigation of the Dell matter and the possible role of other individuals continues.

“Accuracy and completeness are the touchstones of public company disclosure under the federal securities laws,” SEC Enforcement Director Robert Khuzami said in a statement. “Michael Dell and other senior Dell executives fell short of that standard repeatedly over many years, and today they are held accountable.”