An investor group has filed a lawsuit in U.S. District Court in Austin, Texas against Dell Inc., accusing the company of improper accounting practices as well as taking kickbacks.
The lawsuit alleges that Dell has been inflating its profits by hundreds of millions of dollars due to this scheme. It is alleged that Intel was giving Dell up to $1 billion per year in “secret” and “likely illegal” kickbacks to ensure that Dell continued to use only Intel chips in its computers. It is also alleged that Dell was misleading investors about significant problems with accounting, quality and customer service.
Dell is alleged to have received “e-Cap payments” from Intel, which stands for “exception to corporate average pricing” in exchange for not doing business with chip maker AMD.
In August, Dell announced that the Securities and Exchange Commission had been performing an informal investigation into the company’s revenue recognition procedures.