A suit filed by two Dell shareholders says
that rebates were kept secret by Dell so that Intel would not face
further antitrust law suits. It also says that Dell used the
payments to falsely inflate its financial results while Dell
executives sold $3.3 billion of stock.
Calling the two companies' alleged actions
"the largest insider trading pump and dump in history", the suit,
filed by law firm Lerach, Coughlin, Stoia, Geller, Rudman &
Robbins, requests class action.
Intel is already being sued in the US in an
antitrust case, and an EU investigation is ongoing into the
company's practices.
The allegations follow Dell's announcement
that following several poor runs of quarterly results in a row
founder Michael Dell will take over from chief executive Kevin
Rollins in running the company. Rollins will leave Dell.
The lawsuit claims that Dell failed to make
adequate disclosure about what effect the alleged millions of
dollars worth of rebates had on company results. It says that the
rebates were a reward for Dell's exclusive use of Intel chips.
It says that Dell used the revenue from the
rebates to make it look as though Dell was performing better than
it was. When share prices recovered on the back of improved
performance, the suit says, executives took the opportunity to sell
shares at the higher price.
"Dell's insiders took advantage of this
artificial inflation in Dell’s stock price, selling off an enormous
amount of their Dell stock – nearly 99 million shares – for illegal
insider trading proceeds of $3.3 billion," says the suit.
"Many insiders sold off over 90%
of their Dell shares. Dell’s CEO sold off 98.6% of his shares.
Dell’s CFO sold off 99% of his shares. Dell’s CAO sold off 96% of
his shares. The two executives in charge of Dell’s U.S. consumer
business sold off 97% and 100% of their shares."
"The Dell Defendants furthered the fraudulent
scheme by causing Dell to spend over $12 billion in corporate funds
to repurchase over 350 million shares of Dell common stock on the
open market – manipulating that stock price higher," says the
suit.
Dell has not commented on the lawsuit, but an
Intel spokesman, speaking to the Financial Times, said that some
aspects of the suit were "completely made up".
"We deny the plaintiff's allegations and we
plan to move quickly to defend ourselves," said Intel's Chuck
Mulloy.
Intel faces an antitrust lawsuit from Advanced
Micro Devices (AMD), its main competitor. AMD is conducting its
suit in the US, in a Delaware court, but based on allegations about
Intel's conduct outside, as well as inside, the US.
Late last year the Delaware court said it
would not rule on allegations of conduct outside its jurisdiction.
It threw out the section of the suit relating to actions outside of
the US, which observers believe to have been around half of the
suit.
