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Dell Settles With the SEC For $100M 239

Posted by kdawson
from the irregular-as-a-three-dollar-bill dept.
Sri.Theo writes in with news of Dell's humbling settlement with the US Securities and Exchange Commission. The core of the complaint is that Dell took secret payments from Intel to keep AMD's chips out of Dell's machines. The SEC calls it "accounting irregularities" — Dell was dipping into this secret slush fund to bolster its results, quarter by quarter. At one point the payments from Intel made up 76% of Dell's quarterly operating income. "For years, Dell's seemingly magical power to squeeze efficiencies out of its supply chain and drive down costs made it a darling of the financial markets. Now it appears that the magic was at least partly the result of a huge financial illusion. ... According to the commission, Dell would have missed analysts' earnings expectations in every quarter between 2002 and 2006 were it not for accounting shenanigans. ... (Intel is expected to settle a long-running anti-trust case that has highlighted these payments in the next couple of weeks.) ... Michael Dell... and Kevin Rollins, a former boss of the company, agreed to each pay a $4m penalty without admitting or denying the SEC's allegations."
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Dell Settles With the SEC For $100M

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  • Re:Dude! (Score:1, Insightful)

    by Anonymous Coward on Saturday July 24, 2010 @11:43PM (#33018604)

    No, this is white collar crime, which the US frowns upon by making one pay back a small percentage of the damage caused by one's actions.

    I would put long odds on either of these two

  • by RenHoek (101570) on Saturday July 24, 2010 @11:58PM (#33018664) Homepage

    Only a $100M fine? Shows that crime _does_ pay time and again..

  • Re:Dude! (Score:3, Insightful)

    by ilo.v (1445373) on Saturday July 24, 2010 @11:59PM (#33018670)
    No, this is white collar crime, which the US frowns upon by making one pay back a small percentage of the damage^h^h^h^h^h^h PROFIT caused by one's actions.

    There. Fixed that for you.
  • by 1stworld (929011) on Sunday July 25, 2010 @12:11AM (#33018706)
    This is how Crony Capitalism works. As long as you pay either to candidate campaigns or in fines, there are favors to be had at the Washington D.C. Bazaar. Government only goes after the little people and companies because they don't pay up.
  • WTF (Score:2, Insightful)

    by Anonymous Coward on Sunday July 25, 2010 @12:17AM (#33018748)

    They colluded and engaged in a conspiracy in violation of SEC laws and they get a fine?

    A fine? This is beyond pathetic. The SEC may possibly be the worst organization on earth.

  • Frustration (Score:5, Insightful)

    by DoofusOfDeath (636671) on Sunday July 25, 2010 @12:26AM (#33018786)

    I'm really frustrated with settlements. They seem to circumvent several basic principles of justice:

    • One should be considered innocent until proven guilty. If the SEC can't get a conviction, a judge should not allow a settlement. It sounds like a shakedown, not justice.
    • They let the wealthy buy their way out of criminal convictions, whereas the poor cannot.
    • They permit a corporation's finances prevent its workers from facing criminal responsibility for their actions.

    I've heard arguments for settlements such as, "We're not sure we could get a conviction. This lets us get at least a modicum of justice" Well if you're not sure, then maybe you shouldn't be trying to prosecute? It's for a jury to decide what's a just punishment, not the prosecutor.

    Or, "It lets us safe the legal expense of prosecuting." Well, if the system is so broken that cases can't be fought within the financial means of the government, then shouldn't it dawn on someone that it's way broken for individual citizens with limited financial resources?

    America was founded with some beautiful ideals, but I don't have a lot of respect for those who have evolved its legal practices.

  • by whoever57 (658626) on Sunday July 25, 2010 @12:30AM (#33018796) Journal
    Actually, I think it is worse than that. Management conned shareholders about how efficient the company was, and therefore how much the company could be expected to earn in the future. Who were the victims here: the shareholders. The SEC investigates and now the company has to pay a fine. Whose money pays the fine? The shareholders. Put simply, the victims of this fraud get to pay the fine. Yah! Well done SEC, that will provide a real incentive to stop execs doing this in the future. [Yes, I know that Michael Dell has to pay $4M, but this is a small amount to him -- probably less than the fraud earned him]
  • Re:Dude! (Score:5, Insightful)

    by Runaway1956 (1322357) on Sunday July 25, 2010 @12:57AM (#33018892) Homepage Journal

    Uhhhh - troll is trolling, but there is something of a serious question in the troll.

    There really IS a big difference in the two statements. There is really no way to measure the damage caused by Dell's actions. If there is a way to measure the damages to AMD as well as the public, it would be a long, involved process that no one wants to invest the time and resources in.

    However, it's pretty easy to analyze how much of Dell's profits resulted from this dishonesty.

    Personally, I think the fine should be ALL of the ill-gotten profits. If they benefit by ten million, take that ten million, plus a punitive fine. If they profit by 100 million, take that 100 million, plus a punitive fine.

    Sorry for feeding the troll, but I thought some reasonable people might need the distinction drawn for them.

  • by cacba (1831766) on Sunday July 25, 2010 @01:02AM (#33018908)
    Are these the same shareholders that elected those who committed the fraud?
  • Re:Dude! (Score:3, Insightful)

    by Runaway1956 (1322357) on Sunday July 25, 2010 @01:08AM (#33018928) Homepage Journal

    Balance, my young Jedi knight.

    I hate the fact that corporations will throw Grandma, Cousin Susie, and her baby kitty under the bus for profit. All the same, corporations serve society. Without greedy, profit driven investors and company officers, where would we be today? I don't exactly like where we are right now, but it's better than living like feudal Europe, IMHO

    In short, lighten up a little bit. Instead of public executions, let's just put all those bastards into Chinese sweat shops, working for ten dollars a day for the rest of their lives.

  • by Anonymous Coward on Sunday July 25, 2010 @01:20AM (#33018982)

    My small shop has 11 dell workstations. So far, 3 of the 11 power supplies have died.

  • by ISoldat53 (977164) on Sunday July 25, 2010 @02:23AM (#33019180)
    Michael, et al, controls the voting. We piddling shareholders have no real voice in the matter.
  • by JakFrost (139885) on Sunday July 25, 2010 @02:27AM (#33019186)

    "The company neither admitted nor denied guilt as part of the settlement--a common phraseology in such deals."

    How about a big FUCK YOU to Securities and Exchange Commission and the US Department of Justice! How about you dig a little deeper, get the dirt on the direct involvement by Michael Dell and the other board members during the 4-year period and put these schmucks in San Quentin Federal Penitentiary. If you can't find the evidence, just use your powers of Extraordinary Rendition to send a few of these folks over to the Middle East or Africa, a little water boarding, pull of some fingernails and you could get just enough information to find hard evidence to try and convict these people.

    I could name a dozen good computer companies who disappeared during this time frame due to Dell's stellar rise in the computer market though shenanigans like this. Good computer companies that produced better products when under because they didn't cook their books like Dell did and didn't take bribes from Intel.

    Like another poster said, the pure computer companies that did survive like HP (previously Compaq), Acer, etc. might have been involved in this also.

    Intel did just settle the record breaking $1.4 Billion USD to the European Union's commission for violating anti-trust regulations or having to pay $1.2 Billion USD to AMD previously in a similar settlement.

    I'm still glad to see that the NY State case against Intel is still on-going and it would be great if other states and companies jump on this bandwagon for lynching Intel since these guys have been playing some dirty games for a long time. Time to hold Execute Officers directly responsible for criminal and immoral decisions directly liable for their actions and orders. Too bad that our government is in the pocket of big corporations and that no real sanctions will be taken against these business scumbags.

    Dell's success is now forever clouded by this and I think that looking at their shady little deal with Intel, I wouldn't put it past them if there was one going on right now with Microsoft for operating systems. Dell just did pull Ubuntu Linux OSes computers from their web site just as Linux is getting more acceptance by people due to Google's Android mobile OS success in the mobile market and also the upcoming tablet computer revolution. Microsoft isn't playing in this field and they are scared since they cannot compete.

  • by bennomatic (691188) on Sunday July 25, 2010 @02:28AM (#33019192) Homepage
    Well, Intel's actions may have been illegal. Discounts are one thing; hell, everyone loves volume pricing, right? But if the terms are exclusivity, and if they're doing it with all the major vendors, then it becomes a monopolistic, anti-competitive behavior.

    And let's not forget the actual amount of the discount; if you discount stuff low enough so that nobody can compete, and it just so happens that you're selling products below production price, the case could be made that you're doing something called "dumping" which is itself an anti-competitive behavior.

    So there could be more to this than disclosure issues. I don't know for certain, but just as it's illegal both to give and receive bribes, there's probably good reason to decry the behavior of those compliant in the monopolistic behavior.

    I'm not saying I know all the details, by any stretch; all I'm saying is that the GP poster has as worthy a point as your own.
  • by bennomatic (691188) on Sunday July 25, 2010 @02:32AM (#33019202) Homepage
    Well, sort of. Mom and pop probably typically don't vote, but sign off on proxy statements to their investment bankers who do the voting. Any major investment banker with enough proxies to make a difference probably knew what was going on and made a mint themselves, but mom and pop didn't know.

    Even if they did vote, they did so based on lies and fabrications. GIGO, you know. The only thing you can blame them for is getting into the stock market in the first place. Once you're in, it's an elaborate game that's tilted significantly towards insiders who openly flaunt the law because the penalty is pennies on the dollar.
  • Re:Frustration (Score:3, Insightful)

    by phantomfive (622387) on Sunday July 25, 2010 @03:19AM (#33019336) Journal

    They let the wealthy buy their way out of criminal convictions, whereas the poor cannot.

    It's all good, the poor get out of it their own way. Like the homeless guy who lives near my house, who got caught for DUI (don't ask where he got the car) declined to pay the fine and took jailtime instead. It was all good, he got a free haircut. Free food. He didn't have to pay for anything. Plus they gave him some good medical treatment for a skin rash he had. So the poor have their own way of getting out of it (this other guy I know got a commercial-robbery case thrown out of court because all he managed to steal was a couple cans of tuna. True story. This despite the fact that he randomly steals stuff off people's porches, from goodwill, etc).

    It's the middle class that gets screwed. Going to jail is really bad if you have to keep a job, and paying the fine is bad too. Be good if you are middle class, because otherwise you will get screwed.

  • Re:Dude! (Score:3, Insightful)

    by Nursie (632944) on Sunday July 25, 2010 @03:33AM (#33019390)

    You shouldn't pay a fine, but your shares should lose value. Doesn't matter who owned them then, when you bought them you bet on Dell making you money. Sorry if that didn't turn out.

    What you're suggesting is tantamount to corporate immunity from prosecution, for pretty much anything, so long as a couple of years have passed.

  • If you buy a used car which you knew was stolen, then you are guilty of handling stolen goods and not only will you lose the car if the police find out, but you will also be punished for committing the crime.

    The only problem is when people unwittingly bought a stolen car, the police will usually go easy on them in that case but they will still lose the car.

  • Re:Dude! (Score:3, Insightful)

    by Bert64 (520050) <bert AT slashdot DOT firenzee DOT com> on Sunday July 25, 2010 @04:54AM (#33019642) Homepage

    The trouble here, is that if you did that to one misbehaving company, losing the requirement to make a profit would effectively kill any competitors in the market.

    But i do agree punishments for corporations need to be far more severe, at the moment the people at the top of these corps know they can get away with virtually anything and receive little more than a slap on the wrist. There needs to be a real danger of losing everything and being thrown in jail for these people, only then will they consider the law worth obeying.

    At the moment they treat breaking the law like any other business risk, potential high profits for a relatively low risk? why wouldn't they?

  • Re:Dude! (Score:5, Insightful)

    by Jafafa Hots (580169) on Sunday July 25, 2010 @05:23AM (#33019718) Homepage Journal

    Why should you, as part owner of the company, be held liable for crimes committed by the company before you owned it?

    Simple. BECAUSE YOU OWN THE FUCKING COMPANY.
    You buy the company, you buy the liabilities.

    Otherwise you're shifting the cost of the crimes of a company from those who own it to those who DON'T own it. How the fuck is that fair?

    Now, if the previous owners supported such behavior and you're being stuck with the cost, you go ahead and sue them for that.

    You want to treat the owning of a company like a slot machine, then you get to assume all of the TRUE risks instead of shifting them to others.

    Then, something strange and unprecedented might happen. People who own a company might not decide to own it only for a month or two, or a day, or 30 seconds.

    The owners of a company might take the unusual step of deciding they should learn about what the company does before buying into it. Learning what they make. Learning how they operate, what they DO, what actions they take. People might actually feel like they, as owners of the company, have a STAKE in what the company does, besides a hoped-for quick profit. They might feel a sense of personal... gosh, shall we say investment in the company they own.

    Of course, that would mean they would have to devote time and energy to the company, to learning about it, to having a hand in running it, at least in the sense of voting intelligently. And that might mean they would find it necessary to own the company for years even, to get a handle on things. They might find they have to actually be responsible on some level for what the company they own does.

    In short, it would have the strange, market-distorting effect of making the owners of the company act like OWNERS of a fucking COMPANY.

    I realize this is a groundbreaking, alien concept. Holding the people responsible for a company responsible for that company? Insane!

    Why, our very way of life would be radically altered.

  • by Runaway1956 (1322357) on Sunday July 25, 2010 @05:52AM (#33019806) Homepage Journal

    Hmmm. I guess that some people might find the 2200+ numbering to be misleading. In my own experience, those numbers have seemed to be nearly right. I don't see it as fraudulent.

    I'm sure you remember the days when the first Athlons came out. The wife bought one, that ran at 1 ghz, I think she had 128 MB of memory, could have been 256, but I think it was 128. That machine ran like a dog. The machine I was using at the time had an AMD 450 mhz overclocked to 500 - K6-III mobile chip. I could run circles aroung her 1 Ghz machine.

    When she first got it, she was so jealous of it, I wasn't allowed to touch it. Finally, she relented, and allowed me to work on it. I added memory, and gave her a full gig of memory. Ripped out the version of Windows XP that Compaq sold her, along with all the malware and crapware, and installed a pirated version, then got to work tweaking Windows to run fast. When I was finished, she didn't believe that it was the same computer. She actually accused me of replacing the motherboard and CPU!

    My point? I've made it before in other discussions. Speed isn't nearly so important as PERCEPTION. No one who reads slashdot will believe for an intant that my K6 chip was outperforming an Athlon - but is SEEMED that way, because I never had to wait for diskswapping or much of anything else.

    Back to the Ghz+ numbering system. I'm a believer in it. Everything that I've ever used with that silly + sign attached to it ran very nearly what it claimed to run. But, as always, YMMV, and you may have just bought a lemon of a chip.

  • Re:Show of hands (Score:3, Insightful)

    by Ash-Fox (726320) on Sunday July 25, 2010 @07:19AM (#33020114)

    Sounds to me more like you don't know how to get the better deal. Instead you appear to be doing something some of us call "brand loyalty".

  • Re:Dude! (Score:3, Insightful)

    by Ash Vince (602485) on Sunday July 25, 2010 @07:41AM (#33020202) Journal

    You can't believe the damage these punks did to the company

    You have one really weird idea of "damage". Michael Dell founded the business and is now worth $13.5 Billion. He built Dell computers into a business worth $33 Billion in assets with revenue of $59 Billion. If this is is damage you can damage my business any time.

    The truth is that you do not succeed in business by playing nice and being a good boy. You succeed by shafting people. There is the odd exception, but broadly speaking successful businesses are launched by people willing to do anything it takes to make their business a success. Ok, is now being fined a few million, but that is chump change compared to how much he has made from always being able to raise cash easily on the stock market. He would have found it much harder to grow his business the way he did if not for the fact that he was gaining a reputation as a damn good business man.

    It's not surprising the quality sucks.

    What on earth are you talking about? I have never had any problems with Dell PC's at work. They are far from the PC I would buy for my home since i am a techy and like to be able to upgrade my machine easily but if this is not a factor and you just want to buy a PC that works out of the box then they are fine. Who cares of it fails after a year or two, you are probably looking at replacing it by then anyway if you are a business.

    Dell has grown to where it did by fiddling the markets and making dodgy deals with both Intel and Microsoft, but those are damn good business decisions in the screwy world we live in. Do I like this? No I do not but I am unable to change it on my own. The only way things like this would change is if governments looked at imprisoning people like this rather that fining them, but that is hardly likely to happen in the US since they have more politicians in their pocket than we do.

    Successful business owners donate vast amounts to politician campaign funds to make sure that they have the ear of politicians when they get elected. This will always mean that any politician who actually wants to do things for the people will find himself fighting an army of corporate lobbyists. We also have the problem that our media is now almost entirely owned by a few large companies so the news we see is the news they want us to. In this world the politicians have almost no power to do anything unless they can find some businesses that support it too.

  • Re:Dude! (Score:3, Insightful)

    by magical liopleurodon (1213826) on Sunday July 25, 2010 @08:29AM (#33020438)

    Why should you, as part owner of the company, be held liable for crimes committed by the company before you owned it?

    Simple. BECAUSE YOU OWN THE FUCKING COMPANY.
    You buy the company, you buy the liabilities.

    Otherwise you're shifting the cost of the crimes of a company from those who own it to those who DON'T own it. How the fuck is that fair?

    I agree with you 100%.

    I just want to emphasize: companies don't commit crimes, people do. If "the company" knew of the crime being committed and didn't take action, yes, "the company" is liable and owners do need to be held responsible.

    The perps themselves need to also pay (either a fine or jail time depending on the crime). Bernie Madoff and his ilk are great examples (I'm pleased that they sent his software developers to jail too. They were some of his biggest enablers). This may be where RajivSLK was coming from, but he didn't articulate it.

    I bring this up for 2 reasons:
    1. In our rage at "company behavior", we sometimes forget about the people, which is at least as important
    2. If Michael Dell and Kevin Rollins (a former boss) are personally being made to pay up, that means that, aside from Dell being liable, they personally perpetrated crimes (possibly.....rant on SEC below).

    This is my big beef with the SEC. We should actually enforce our fraud laws and when someone is accused of committing fraud, have a real investigation and possibly some arrests, not have the SEC come in, say that there's "accounting irregularities" and slap a person on the wrist with a puny fine. Half the time the SEC is in cahoots with these companies/people and are committing crimes themselves.

  • Re:Frustration (Score:3, Insightful)

    by selven (1556643) on Sunday July 25, 2010 @10:02AM (#33020850)

    Something like settlement extortion will exist for as long as it is cheaper to pay up than it is to defend yourself. Perhaps we should make the entire profession of lawyers illegal? (no sarcasm there)

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