(CN) – Dell Inc. agreed to pay $100 million to settle a lawsuit filed Thursday by the Securities and Exchange Commission accusing the computer maker of fraudulent accounting practices that falsely made it look like the company was meeting Wall Street earnings targets.
The SEC claimed in its federal lawsuit in Washington, D.C., that Dell “maintained a series of ‘cookie jar’ reserves that it used to cover shortfalls in operating results” from 2002 to 2005. The agency also said Dell failed to disclose to investors large payments it got from Intel Corp. to not use central processing units made by Intel’s main rival, Advanced Micro Devices.
The SEC said it was those payments that allowed Dell to meet its earnings targets. When Intel cut off payments, Dell misled investors by not disclosing the real reason behind the company’s decreased profitability, the SEC claimed.
The settlement was “in the best interest of the company, its customers and its shareholders” said Sam Nunn, presiding director of Dell’s board of directors. “
The SEC charged Dell Chairman and CEO Michael Dell, CEO Kevin Rollins and former CFO James Schneider for their alleged roles in the accounting violations. Also charged for improper accounting were former regional vice president of finance, Nicholas Dunning, and former assistant controller Leslie Jackson.
“Accuracy and completeness are the touchstones of public company disclosure under the federal securities laws,” said the director of the SEC’s Division of Enforcement Robert Khuzami. “Michael Dell and other senior Dell executives fell short of that standard repeatedly over many years, and today they are held accountable.”
Dell settled without admitting or denying the allegations.
Aside from the $100 million, Michael Dell and Rollins each will pay a $4 million penalty. Schneider will pay an additional $3 million.