Dell Reaches Settlement, Agrees to Pay SEC $100 Million

Today, Dell Inc. (NASDAQ: DELL) announced that it has agreed to a $100 million settlement with the Securities and Exchange Commission regarding the agency’s investigation into the company’s business practices with the chip maker, Intel Corporation (NASDAQ: INTC) and separate matters involving accounting and financial reporting.  It was also announced that the agency has agreed to a $4 million settlement with the company’s CEO, Michael Dell. The company had recently reported that it had established a reserve for $100 million for the potential settlement of the SEC investigation.

The SEC’s complaint alleges that the company engaged in accounting practices that violated federal securities laws and SEC rules, from 2001 to 2006.  Specifically, it alleges that Dell’s public financial statements contained “materially misleading statements and omissions regarding the company’s receipt of certain payments from Intel and the effect of such payments on the company’s operating results.” Additionally, it alleges that Dell fraudulently used “certain reserve and accrued liability accounts.”

The SEC’s allegations regarding Mr. Dell involve his failure to provide adequate disclosures with respect to the company’s relationship with Intel before the fiscal year 2008.  The announcement provides that “Mr. Dell’s settlement does not involve any of the separate accounting fraud charges being settled by the company and others.” The announcement further provides that Mr. Dell’s settlement is limited to claims where only negligence is required to establish liability – indicating that fraudulence did not need to be shown to satisfy the government’s legal burden, had the case gone to trial.

The company and Mr. Dell neither admitted nor denied the allegations in the SEC’s complaint.  The settlements are subject to approval by a U.S. District Court.

Ashley C. Allen