A federal judge has approved Dell’s $100 million settlement with the United States Securities and Exchange Commission over kickbacks the company received from chipmaker Intel from 2001 to 2007. Although the settlement agreement has Michael Dell paying $4 million out of his own pocket to settle the matter, the company has admitted no wrongdoing and Michael Dell remains his company’s chief executive officer. Nonetheless, consumer advocates and investment community watchdogs are noting the ruling as a strong example of financial regulatory enforcement.
The settlement was originally proposed back in July, and centers around Dell accepting payments from chipmaker Intel for exclusive of Intel CPUs and chipsets in Dell notebooks, desktop systems, and servers. Although such payments are not themselves illegal, they must be fully disclosed—and that’s where Dell fell down. Dell did not disclose the payments as part of its operating income, even though at one point in 2007 the payments comprised the majority of the company’s revenue, artificially inflating the company’s results. At the same time, Michael Dell and other Dell corporate officers were accused by investors of illegally back-dating stock options and engaging in insider trading.
Under the settlement agreement, Dell admits to doing nothing wrong, but Michael Dell will be paying $4 million out of his own pocket to settle the matter, and former Dell CEO Kevin Rollins and CEO James Schneider will each pay $4 million and $3 million themselves, owing to their ongoing roles in the matter. Dell has also agreed to a permanent injunction against future securities laws violations, and has agreed to improve its disclosure practices and expand oversight by outside attorneys.
Although the SEC has fined companies more than $100 million in the past, the decision to hold corporate officers individually accountable for multi million-dollar amounts is unusual—particularly when one of those officers is the current chief executive.
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