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Dell admits to 4 years of financial malfeasance -- up to $150 million to be scrubbed
It's already been a rough year for Dell's dwindling market share much to the delight of HP and Apple. Now, as followup to the evidence of accounting errors and misconduct announced back in March, Dell has admitted that their senior / executive management regularly falsified quarterly financial returns from 2003 to 2006. In a filing with the SEC, Dell admits that "account balances were reviewed, sometimes at the request of senior executives, with the goal of seeking adjustments so that quarterly objectives could be met." In only one case did Dell actually invent sales numbers, usually, the shifty accounting involved the recognition of revenue earlier than appropriate. Dell must now reduce its reported net income for the period by as much as $150 million with the biggest downward restatements hitting Q1 2003 and Q2 2004 by 10 to 13 percent -- other quarters are expected to be 5 percent or less. It's unclear whether any of the management responsible for, or engaged in this malfeasance are still employed by Dell. Dell's CFO only said that "disciplinary action had been taken" and that current management and the board are "comfortable we have taken steps necessary to make sure this never happens at Dell again." Dell's stock is actually up a few points in pre-market trading which could be a sign that investors aren't too concerned by the piddley restatement (Dell posted $12 billion in net income during the period in question) and are stoked to see Dell finally move forward, undistracted. That is, if the SEC agrees. We'll see how the stock does once investors wake to the latest fetor to seep outta Austin this side of SXSW.
SEC considering charges against Take-Two
The US Securities and Exchange Commission has sent publisher Take-Two a Wells notice, which indicates that the agency is considering filing charges and pursuing a "civil monetary penalty," according to Reuters.Though the publisher has previously been entangled with the government over a cup of warm java, the issue here arises from improper backdating of employee stock options. An internal review by the publisher discovered that their financial records for the last decade were unreliable. Former CEO Ryan Bryant has already plead guilty and was punished five years of probation and millions of dollars in fines.The Wells notice gives Take-Two a final chance to convince the SEC not to take action. Though their financial quarter already looks bleak given the GTA IV delay, the company may have a hit on their hands with BioShock given the inordinate amount of praise that title has received.
Xbox 360 exec Robbie Bach's personal red ring of death: insider sales?
Robbie Bach, Microsoft's executive in charge of the Xbox game console, raised a few eyebrows recently when he sold millions in Microsoft stock just prior to going public with Xbox 360 woes. In a review of SEC filings, Robbie sold some $6.2 million worth of company stock between May 2 and Microsoft's July 5th announcement of charges exceeding $1 billion for Xbox 360 repairs. It is of course perfectly normal for high-ranking corporate execs to turn over company stock. However, this is typically done according to a schedule in order to deflect concerns over insider trading -- Bach's trades followed 8 months of zero sales. Microsoft's stock did not make a significant move after the announcement which, in legal hindsight, has led some insider watchdogs to give Robbie the benefit of the doubt. We'll see if the SEC is so forgiving.
SEC to fine Nortel up to $100 million for shady accounting
Looks like a heartfelt apology just wasn't enough for the SEC -- the agency is expected to fine formerly high-flying communications company Nortel up to $100 million this week for inflating revenue on quarterly reports by an estimated $3.4 billion. The SEC is also suing a handful of former Nortel executives who approved the bogus numbers, allegedly to trigger bonuses for themselves. Nortel just settled several outstanding class-action lawsuits from shareholders for slightly more than $2 billion, so another $100 mil probably seems like a drop in the bucket at this point, but here's hoping this whole sad chapter is over -- we still want to see that MIMO WiMAX rig start shipping.
NVIDIA faces barrage of civil lawsuits
Those price fixing allegations that AMD and NVIDIA were facing late last year may have vanished from the forefront of your memory, but you can rest assured that the legal teams connected to the two are still workin' overtime to clean things up. Apparently, NVIDIA has been slapped with as many as 51 civil complaints over "price fixing and anti-competitive agreements, among other things," and on its March 16th filing with the SEC, the firm states that "42 civil complaints as of March 14 were filed against it on the same allegations." Notably, the outfit did state that the "lawsuits are putative class-actions," and unsurprisingly felt that they were all lacking merit and would be fought vigorously. Tsk, Tsk.[Via Gearlog]
New York Attorney General files Dell deception lawsuit
New York Attorney General Andrew Cuomo has filed a lawsuit against Dell, accusing the company of false advertising, failure to honor rebates and warranties, and several other fraudulent acts (including the specific, legally defined crime of "fraud" in New York). Dell is quite unsurprisingly contesting the suit, saying that "we are confident that our practices will be found to be fair and appropriate," and that the number of customers named in the Attorney General's filing "are based upon a small fraction of Dell's consumer transactions." Dell spokesman Bob Pearson makes sure to say that "even one dissatisfied customer is too many," which sorta makes his earlier statement about the number of affected customers being small meaningless: especially since if the claimants are successful, this'll make at least two dissatisfied Dell customers. As one of America's largest corporations, Dell has been the subject of many lawsuits, although not all are filed by Attorneys General. That said, Pearson has made certain that this recent suit is not related to the Security and Exchange Commission's ongoing investigations into Dell's accounting practices. Well, that's a relief then.
Dell finds evidence of accounting errors and misconduct
RuRow Raggy -- in a wee-hour, tail-between-the-legs announcement, Dell just admitted financial "accounting errors" and "evidence of misconduct." This, after a months-long, independent review by the company's internal audit committee which, incidentally has yet to complete its investigation. It's not clear if any of this will require the restatement of previous earnings reports although second, third and fourth quarter statements from Dell all remain preliminary and have yet to be filed with the SEC. An analyst said to have spoken to Dell's management about the matter in "general terms" calls the situation "serious" but "not life threatening" to Dell. However, we'd feel a bit better if s/he had talked to the SEC instead. After all, they've been probing Dell's financials since August of 2005. It's also not clear if the alleged Intel kickbacks play any role in the matter. However, the resignations of both Dell's former CFO and Kevin Rollins (former CEO) in recent months is starting to look suspiciously familiar. Hey, welcome back Michael, aren't you glad you came?[Thanks, LordFarkward]
Apple takes $84 million charge, defends Steve Jobs in options scandal
While Apple's surely enjoying the perks of having a monumental amount of iPods unwrapped just days ago, everything's not exactly kosher in Cupertino. Aside from the mysterious mouse the firm just patented, the company is facing another bevy of off-the-wall lawsuits, all while trying to fish its CEO out of potentially hot water. After the Securities and Exchange Commission found that ole Steve was granted 7.5 million stock options without the proper authorization of Apple's board of directors in 2001, there was widespread speculation that Mr. One More Thing may suffer the same fate as Apple's former CFO Fred Anderson, who resigned after a similar debacle in 2004. It seems, however, that things just might work out okay after all, as Apple finally filed its required forms with SEC, recognizing a "total additional non-cash, stock-based compensation expense of $84 million after tax, including $4 million and $7 million in fiscal years 2006 and 2005, respectively." Aside from taking the lofty charge, the company also stated that while Jobs was "aware of the favorable grant date recommendations, he did not financially benefit from these grants or appreciate the accounting implications." So all those out there holding your breath to see if Macworld would ever be the same if this went south, it looks like we'll be seeing jeans and a black shirt all over again in just a few weeks.
Financial Times: Forged Documents related to Jobs' options
Sources have informed The Financial Times of London that the forged documents at the center of the ongoing SEC investigation relate to illegal activities surrounding options given to Steven Jobs. According to the FT story, Jobs "was handed 7.5m stock options in 2001 without the required authorization from the company's board of directors." and that "Records that purported to show a full board meeting had taken place to approve Mr Jobs' remuneration, as required by Apple's procedures, were later falsified."If this is in fact the case, it certainly makes sense that Jobs would seek his own external legal counsel both to more closely protect his personal interests as well as put some distance between himself and the company as a whole. Update: The FT article makes no mention of wrong doing by Jobs himself, and as such this post has been updated.[via Cult of Mac]
Stock options investigation delays Apple SEC filing
Apple's ongoing investigation into its stock option grants has delayed its SEC 10-K filing. The filing, which was due yesterday, may be delayed for as much as a month. If you recall, Apple admitted that employee stock options may have been been backdated. Companies use backdating in order to lower the apparent value of the issued stocks. Although news reports suggest this isn't illegal, the backdating has to be accounted for and disclosed to investors and so forth. CEO Steve Jobs was reportedly aware of the backdating and Apple's investigation is ongoing.
Boardroom guys: Let's make a Fallout MMO
According to a November SEC filing, battered software publisher, Interplay, imagines a wonderful future with gamers paying it $160 million per-year beginning in 2011. The one product that could relaunch the company: a Fallout MMO.In the SEC document -- with typical financial disclaimers saying the projection may never be realized -- Interplay hopes a $75 million Fallout MMO production of will save the farm. (A large part of that figure includes marketing.) The company intends to sell common stock to generate a significant part of that budget -- that's why this filing exists for us to drool and scribble notes in the margins.While the product may eventually be created, give it at least a few months before getting excited; Interplay hopes development begins in early in 2007. And even then, you'll have to wait until Q3 2010 before the company intends to launch; three-and-a-half years in production seems optimistic. Keep the skepticism setting on high.[Via Inside Mac Games]
Apple's Special Committee Reports Findings of Stock Option Investigation
Back in August, Apple announced they had found some stock option irregularities and launched an internal investigation to get to the bottom of things. This voluntary audit netted a warning of de-listing from NASDAQ because they had to delay filing their Q3 earnings results (fortuately, NASDAQ cut Apple a break). Today, the big fruit has issued a press release with the findings of this audit, which was performed by a special committee of outside directors, independent counsel and accountants. This crack team had to shuffle through over 650,000 emails and documents (Spotlight to the rescue!), as well as conduct over 40 interviews of current and past employees.In summary, the investigation's results go a little something like this: No misconduct by current members of Apple management was found The most recent evidence of 'irregularities' points to 15 stock option grants made between 1997 and 2002. Said grants were apparently issued before their approval dates Steve Jobs knew about the grant dates, but he apparently didn't know about the slight-of-hand accounting implications, nor did he benefit from any of them The data found 'raises serious concerns' of two former officers related to the accounting, recording and reporting of these grants. Apple will provide details to the SEC Mr J is quoted apologizing to Apple's shareholders and employees for these problems, especially since they happened under his watch, saying "They are completely out of character for Apple." He continues saying "We will now work to resolve the remaining issues as quickly as possible and to put the proper remedial measures in place to ensure that this never happens again," i.e. - somebody's in for a whole lotta iButt woopin'.In the collateral damage department, Fred Anderson, Apple's former CFO from 1996 to 2004 who now serves on the company's board of directors, has decided now might be a good time to resign from said board.Finally, Apple and the audit committee agree that the company will ultimately have to restate their historical financial statements to "record non-cash charges for compensation expense relating to past stock option grants." At this time however, the company is still working to analyze their findings and determine which periods will need restating, as well as the differential amounts.
Nasdaq warns Apple of non-compliance
Following reports of possible stock option improprieties by Apple executives and continuing internal and external investigations of these concerns, Apple has announced that it will delay the filing of its Q3 quarterly earnings reports until it is satisfied that the issues have been properly accounted for and addressed. Delay of the filing puts Apple out of compliance with Nasdaq regulations, and continued non-compliance without taking proper measures are grounds for Nasdaq to cease listing of Apple shares. Apple has said it's stock will remain listed pending a hearing and decision by the Nasdaq listing qualifications board. Despite these issues, perhaps because Apple itself–and not a third party, uncovered the irregularities, Apple stock has remained fairly stable.
SEC investigates Take-Two
There is no peace for Take-Two Interactive. Seeing as the now-infamous publisher of some of the most reputable (Civilization) and disreputable (Grand Theft Auto) does not have enough trouble on its hands, it will now be investigated by the US Securities and Exchange Commission. The SEC notified the company that it was launching an informal probe into how the publisher has granted stock options from 1997 until present. Take-Two has confirmed its intentions to cooperate with the non-public investigation. The Associated Press reports that Take-Two is one of many companies being investigated by the SEC for having "backdated stock option grants to time them at share price lows, thus boosting gains on the sale of the stock."[via GamesIndustry.biz]
SEC to begin probe into Xero Mobile
Well, you can imagine the surprise we're all feeling over here at Engadget HQ at the news of Xero Mobile -- the MVNO started by former Gizmondo execs -- getting calls from the US Securities and Exchange Commission regarding their "conducting an informal inquiry relating to certain aspects of the company's business." For example, how they intend to pay back all those investors after a track record of pump and dump business scams? Something like that? Apparently Xero feigned innocence, shrugging off the initial inquiry, stating they are "unaware of the reason for the request," but apparently are preparing to cooperate voluntarily even though no formal investigation has begun. Oh sure, we have to give them credit for opening themselves up to SEC queries even though they're not yet formally indicted, but you'll have to forgive us if we're just a little skeptical about these guys, even when they claim to be showing their hand.
Infinium's name is now Phantom Entertainment
Infinium, the company that didn't bring us the Phantom game console, has changed its name to Phantom Entertainment. Now, I'm not an expert on brand recognition, but renaming your company so it's even more closely associated with a product that has topped vaporware charts and was founded by a person that has been accused of pumping stock doesn't strike me as a good move. Talking of the pump 'n' dump accusation that has been levied against former Infinium CEO Tim Roberts; xantar over at The Gaming Hobo spotted an amusing little snippet regarding the Securities and Exchange Commission's investigation into Roberts. Apparently the fax that provided evidence that Infinium was pumping stock was sent to the commission's California office, making the SEC one of the one million recipients. A tip to any budding fraudsters out there: if you're gonna try and run up stocks so you can sell them at artificially inflated prices, don't notify the authority responsible for cracking down on such illegal activities.
