Welcome Guest. | Log In| Register | Membership Benefits

  • Email this page E-mail
  • |  Print Print
  • |   Bookmark and Share
  • icon

Dell Hit With Shareholder Lawsuit


Investors allege Dell's relationship with Intel contributed to financial mismanagement that artificially inflated the computer maker's stock price.



On the heels of ousting its CEO this week, Dell is facing an investor lawsuit that alleges company executives schemed to improperly account for hundreds of millions of dollars from business partner Intel.

A class action law suit filed in U.S. District Court in Austin, Tex., contends that Dell executives not only took "kickbacks" from Intel, but then used the money to artificially inflate the company's stock price. The suit also alleges the executives then used the supposedly bogus stock price to reap billions of dollars selling their Dell stock, all while earning tens of millions of dollars in bonuses and additional stock option grants.

The suit names Kevin Rollins, who was Dell's CEO until he resigned this past Wednesday. It also names Michael Dell, the company's founder who stepped back into the CEO seat this week, along with James Schneider, Dell's former CFO. PricewaterhouseCoopers, Dell's outside auditing company, is named in the suit as well.

A spokesman for Dell declined to comment on pending litigation. An Intel spokesman denied any wrongdoing on his company's part.

"We've conducted a preliminary review of the complaint. At first glance, it appears that some of the allegations with respect to Intel appear to have been completely made up," the spokesperson told InformationWeek. "While the plaintiff rehashes anti-trust allegations from other cases, there is no anti-trust claim in this case. We deny the plaintiff's allegations and plan to move quickly to defend ourselves."

Intel also declined to comment on whether the company is moving to file a dismissal or a counterclaim. "I don't think we've made a determination there," the spokesperson added. "It would be premature to talk about our strategy at this stage."

The shareholders are being represented by William S. Lerach, a prodigious class-action litigator. He's well-known in boardrooms and courtrooms, in part for his litigation against Enron, the toppled corporate energy giant. He is with the San Diego firm Lerach Coughlin Stoia Geller Rudman & Robbins.

Industry analysts say this is obviously another blow for a company that is shaking up its leadership in an effort to right the ship. Dell, which just a few years ago dominated the computer-maker business, has stumbled. Its growth rate has slipped as rival Hewlett-Packard picks up momentum and fiercely battles for the position of top PC maker in the world.

"It really hasn't been the best week, especially with the changing of hands in the CEO post," says Jim McGregor, principal analyst and research director with In-Stat.

Page 2: 
1 | 2 Next Page »


Subscribe to RSS


Advertisement






Get InformationWeek in Print

Apply for a free 52-week subscription to InformationWeek (a $199 value)



NOTE: Offer valid for U.S., U.S. possessions, & Canada only.