Showing posts with label Dell. Show all posts
Showing posts with label Dell. Show all posts

Sunday, 24 April 2011

Dell Accounting Scandal 'Not A Happy Story' - CFO

07:42 Jas

Aug. 16, 2007    7:34 PM EST
Dell (NSDQ:Dell) Chief Financial Office Donald Carty acknowledged that some executives were fired as a result of accounting improprieties found during a lengthy internal investigation at the company, but declined to say whether all top Dell executives involved in the mess had been terminated, when he spoke during a conference call with financial analysts to talk about the matter.
The accounting irregularities, which Dell said were directed in part by unnamed, top executives at the PC maker between 2002 and 2006, will mean Dell will restate a relatively small amount of earnings - - up to $150 million - - but the company acknowledged other shoes could drop. The U.S. Securities and Exchange Commission and the U.S. Attorney for the Southern District of New York have been conducting their own investigations of Dell's accounting and financial reporting.
"This is not a happy story for Dell, nor one we are terribly proud of," Carty said.
Dell said Thursday that a year-long Audit Committee investigation of accounting issues found that executives wrongfully manipulated accruals and account balances, often to meet Wall Street quarterly financial expectations in prior years. The probe was headed by an outside law firm, Willkie Farr & Gallagher of New York, and involved an outside accounting firm, KPMG. More than five million documents were examined during the probe.
Despite acknowledging that Dell will tighten its financial controls, and that it had fired, reassigned or fined some employees as a result of the internal investigations, Carty declined three separate times to say whether all of the Dell executives involved in the matter had been purged from the company. Carty declined to name any of the executives individually.
"I think not only have I conducted a series of recommendations to the board, with respect to the remedial action . . . the Board (of Directors) has approved the remediation plan and approved the actions," Carty said when one analyst asked whether all employees involved in the accounting misconduct had been ousted. "We've taken the steps necessary to ensure this never happens again."
To another analyst, Carty said: "You've got to take this for how you decide to take it. Both the leadership team of the company and the Board feels we have absolutely taken the necessary remedial actions."
In the conference call, which lasted about a half-hour, Carty said investigators for the SEC gave the company some breathing room to finish its internal investigation and now has its findings.
"The SEC, while they didn't interrupt their activity entirely, they stood down such that they could benefit from the information that came out from the Audit Committee investigation," Carty said. "The company has met with the SEC several times to discuss the issues that were identified . . . They obviously are going to continue their process."
An SEC spokesman did not immediately return a call seeking comment.
While Dell's formal announcement and Carty both stressed the restated earnings would reflect only a fraction of the PC maker's overall business during the time in question, the timing of the accounting manipulations occurred during critical periods for Dell.
For example, the company said that the most significant accounting manipulations happened during several quarters - - including the first quarter of its fiscal 2003 year, when Dell turned in earnings of 17 cents per share compared to Wall Street consensus expectation of 16 cents; the second quarter of fiscal 2004, when Dell met Wall Street expectations exactly with 24 cents of earnings per share; the fourth quarter of fiscal 2005, when Dell turned in earnings per share of 26 cents against Wall Street expectations of 36 cents; and the second quarter of fiscal 2005, when Dell exactly met Wall Street's expectation of 31 cents per share.
"We did not maintain an effective control environment," Carty said. "Accounting adjustments came to be viewed as an acceptable device to compensate for operational shortfalls."
Carty also acknowledged that, in addition to the other accounting irregularities, there was "part of a transaction that occurred overseas where we did find evidence of fraud, revenue that had been booked that had to be undone." He stopped short of offering specifics.

SEC sues ex-Dell accountants over fraud

05:40 Jas

NEW YORK | Fri Aug 27, 2010 8:21pm EDT

(Reuters) - The U.S. Securities and Exchanges Commission on Friday sued two former top accountants of Dell Inc for manipulating financial statements to meet Wall Street earnings targets between 2001 to 2003.

The regulator said in its suit, filed at the U.S. District Court of the District of Columbia, that former Chief Accounting Officer Robert Davis, and former Assistant Controller Randall Imhoff had maintained a number of 'cookie jar' reserves -- an improper accounting method in a bid to cover shortfalls in Dell's operating results.

The SEC said the improper accounting led to Dell having to restate all its financial statements from 2003 to 2006.

Dell, the world's third largest computer maker, last month agreed to pay $100 million to settle charges by the SEC that it had used hidden payments from Intel Corp and fraudulent accounting to meet analysts' targets.

Under the settlement, Dell founder Michael Dell, along with former CEO Kevin Rollins, each agreed to pay $4 million. Former Chief Financial Officer James Schneider agreed to pay $3 million.

The cases are re: SEC v. Davis, No. 10cv1464, and SEC v. Imhoff, No. 10cv1465, U.S. District Court, District of Columbia.

(Reporting by Yinka Adegoke; Editing by Richard Chang)

Dell fined $100m for accounting fraud that misled investors

05:06 Jas


Friday 23 July 2010 09:28
PC maker Dell and its chairman Michael Dell will pay fines of $100m (£65.2m) and $4m respectively to settle US Securities and Exchange Commission charges that it misled investors through false accounting to meet Wall Street expectations, the stock market regulator said yesterday.
The charges relate to fees paid between 2002 and 2006 by chipmaker Intel to remain the sole supplier of some microprocessors after Dell said it would buy chips from Intel's rival AMD. The payments represented up to 76% of Dell's operating profit, the SEC said.
"These payments, rather than the company's management and operations, allowed Dell to meet its earnings targets," the SEC said.
After Intel cut these payments, Dell again misled investors by not disclosing the true reason behind the company's decreased profitability, it said.
Together with Michael Dell, the SEC charged former CEO Kevin Rollins, and former CFO James Schneider for their roles in the disclosure violations.
It charged Schneider, former regional vice-president of finance Nicholas Dunning, and former assistant controller Leslie Jackson, with improper accounting.
Without the Intel payments, Dell would have missed the EPS (earnings per share) consensus in every quarter during the period, the SEC said, in a complaint filed in a Washington court.
The SEC alleged that Schneider, Dunning, and Jackson engaged in improper accounting by maintaining a series of "cookie-jar" reserves that it used to cover shortfalls in operating results between financial years 2002 and 2005.
Dell's fraudulent accounting made it appear that it was consistently meeting Wall Street earnings targets and reducing its operating expenses through the company's management and operations, the SEC said.
According to the complaint, Intel made exclusivity payments to Dell for Dell to not use CPUs made by AMD. These grew from 10% of Dell's operating income in financial year 2003 to 38% in 2006, and peaked at 76% in the first quarter of its financial year 2007.
When Intel cut its payments after Dell agreed to buy AMD chips, Dell's operating income in 2Q07 dropped 75%.
The SEC alleged that the accused failed to disclose the true reason for the drop.
"Michael Dell, Rollins, and Schneider had been warned in the past that Intel would cut its funding if Dell added AMD as a supplier," the SEC said. "Nevertheless, in Dell's second quarter FY 2007 earnings call, they told investors that the sharp drop in the company's operating results was attributable to Dell pricing too aggressively in the face of slowing demand, and to component costs declining less than expected."
The SEC's complaint also alleged that the reserve manipulations allowed Dell to miss-state materially its earnings and its operating expenses as a percentage of revenue, a key performance indicator, for more than three years.
The manipulations also let Dell miss-state materially the trend and amount of operating income of its key EMEA division between its third quarter of 2003 and its first quarter of 2005.
The fines settlement allows the accused to avoid admitting or denying the SEC's allegations, but all have signed consent orders to not violate federal laws.
Schneider was banned from practising as an accountant for five years, Dunning and Jackson were banned for three years.