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Jul 16

Dell moving closer to SEC settlement

Posted by Stephen Taub in settlementSecurities and Exchange CommissionDellcompliance

Stephen Taub
Dell and founder, chairman and CEO Michael Dell are getting close to settling with the Securities and Exchange Commission.

The computer giant Friday adjourned its annual meeting, saying it wanted to give shareholders a reasonable amount of time to consider its recent offer to the regulator.

In a separate announcement on Friday, Dell announced that the company and Michael Dell have proposed settlements to the staff of the SEC, which the staff has agreed to recommend to the SEC.

In June, the company said it recorded a $100 million liability in its first quarter report to establish a reserve for a potential settlement.

It added that the settlement would involve a civil injunctive action against the company for alleged violations of certain federal securities laws, including the antifraud provisions of federal securities laws, relating to certain accounting and financial reporting matters.

Dell said the settlement would also include negligence-based fraud charges, as well as other non-fraud based charges, relating to the company's disclosures and alleged omissions prior to fiscal 2008 regarding certain aspects of its commercial relationship with Intel.

In addition, the company said that discussion between Michael Dell and the SEC involved alleged violations of negligence-based fraud provisions of the federal securities laws, as well as other non-fraud based provisions. However, it stressed a deal between the two parties would not include any bar against Dell's service as an officer and director of a public company. Also, any settlement would be made without admitting or denying the SEC's allegations.

In August 2005, the SEC initiated an inquiry into certain of Dell's accounting and financial reporting matters and requested that Dell provide certain documents. The SEC expanded that inquiry in June 2006 and entered a formal order of investigation in October 2006.

Dell also undertook an independent investigation, completed in 2007, which led to a restatement of certain historical financial reports and implementation of a number of remedial measures.

During the first quarter of this year, Dell learned that, in connection with the SEC investigation, several former Dell employees received "Wells Notices" from the SEC staff, which indicate that the SEC staff has made a preliminary decision to recommend that the SEC commence a civil or administrative action against the recipients of the notices.


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