Dell agreed Thursday to pay $100 million to settle the Securities and Exchange Commission’s charge that the computer maker used accounting games to meet earnings targets for years.
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The settlement is the largest for accounting or financial disclosure problems since mortgage giant Fannie Mae paid the SEC $400 million in 2006.
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The SEC alleges that from 2002 to 2006, Dell met or beat analysts’ earnings expectations by not accurately disclosing payments that it received from computer-chip maker Intel not to use chips from Intel’s rival Advanced Micro Devices. These payments accounted for 76% of Dell’s operating income in early 2007, the SEC says. Dell also covered earnings shortages by dipping into reserves and said the seemingly strong results were due to strong management and operations, the SEC says.
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Several current and former Dell executives also settled with the SEC and paid fines. Founder and CEO Michael Dell and former CEO Kevin Rollins each agreed to $4 million fines for allegedly not disclosing important information to investors. Former CFO James Schneider agreed to a $3 million fine and a suspension from acting as an accountant for companies that file to the SEC for five years. Nicholas Dunning, Dell’s former regional vice president of finance, agreed to a $50,000 fine. Dunning and another former Dell accounting staff member, Leslie Jackson, agreed to three-year suspensions.
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The SEC initially approached Dell in 2005, and in 2007 the company acknowledged accounting errors and restated its financial results from fiscal year 2003 through its first quarter of 2007, Dell spokesman David Frink says.
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Dell is pleased to reach a settlement … and focus on our customers, Frink says. Michael Dell, in a statement, said, We are pleased to have resolved this matter. Dunning’s lawyer Joseph Warin issued a statement saying that Dunning was happy to put the matter behind him. The…