Dell faces investor lawsuit over ‘illegal Intel kickbacks’

“Investors have filed a lawsuit against Dell Inc., accusing the computer maker of improperly accounting for hundreds of millions of dollars in payments from long-time partner Intel Corp., an attorney for the plaintiffs said on Friday,” Reuters reports.

Reuters reports, “The lawsuit accuses Dell of artificially inflating profits ‘by secretly receiving approximately $250 million a quarter in likely illegal rebate kickbacks payments’ from Intel in return for an exclusive deal to purchase Intel’s microprocessors, class-action lawyer William Lerach told Reuters.”

“The plaintiffs also contend that the company and its executives participated in a ‘widespread, long-running scheme to defraud’ shareholders and inflate Dell’s stock price, said Lerach, head of law firm Lerach Coughlin Stoia Geller Rudman & Robbins LLP in San Diego,” Reuters reports.

Reuters reports, “The suit was filed on Wednesday in U.S. District Court in Austin, Texas, by the union-backed Amalgamated Bank’s LongView Funds and the UK-based West Midlands Pension Fund, Lerach said. It seeks class-action status on behalf of other investors. A Dell spokesman said the company does not comment on pending litigation. The company has not seen the lawsuit, he added.”

Full article here.

MacDailyNews Take: Dell’s future is so bright, we’ve gotta wear night vision goggles.

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29 Comments

  1. You mean their margins on their CRAP boxes were even lower than they reported? What a surprise. Of course, even though there are million that are stupid enough to buy this crap, at least they are not stupid enough to pay high prices.

  2. Reuters reports, “The lawsuit accuses Dell of artificially inflating profits ‘by secretly receiving approximately $250 million a quarter in likely illegal rebate kickbacks payments’ from Intel in return for an exclusive deal to purchase Intel’s microprocessors, class-action lawyer William Lerach told Reuters.”

    Hate to defend Dell but this is crap. It doesn’t matter how Dell reports the payments, either as revenue or a reduction in COGS, the result will be higher profits.

    Kickbacks? Give me a break. Dell got preferential pricing by agreeing to a sole source supply contract. The amount they got back was determined by the amount they purchased, hence the payment after the fact.

    Anybody notice that the law firm involved was investigated by the AG for illegally paying plaintiffs to bring their suits to them?

  3. What the difference between “receiving kickbacks” and “bargaining for preferential prices”? There seems to be a fine legal line here. If shareholders received financial benefit of the Dell-Intel deal, assuming that the deal was legal, why are they complaining? It would seem that shareholders are upset they didn’t know everything about the business relationships that Dell developed, but this doesn’t seem reasonable. Are shareholders typically apprised of every letter, promise, contract, or agreement that companies make?

  4. As much as I’m not a fan of Dell… c’mon MDN. This is a just a stunt by the litigation bar. And if Dell got the fine points of accounting wrong, BFD. I don’t know the accounting fine points, but at worse, they put it on the wrong line or in the wrong quarter.

    And the story I read made it sound quite reasonable… they used the payments from a supplier to reduce cost of goods sold. That’s certainly how I’d account for it with a logical Accounting 101 perspective. It would be more suspect if they used it to inflate revenue. (Though I’ve no idea what the actual rules are.)

    These lawyers are the same people who are suing (with straight faces) Apple because SJ has “damaged” the shareholders he’s made rich.

    “Possibly illegal kickbacks” sounds like slimy lawyer speak for “rebate”. Plus, while Intel’s marketing practices might have been illegal, that doesn’t make it a crime for me to buy their products under their terms. MS purchasers/users did not commit wrongdoing just because MS engaged in illegal monopolistic practices.

    No fan of Dell here, but let’s never lose sight of what vampires the shareholder suit lawyers are.

    Puh-leeeeeease.

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