By Gabriel Perna: Subscribe to Gabriel's RSS feed
August 31, 2010 4:35 PM EDT
The U.S. Securities and Exchange Commission has filed complaints against two former top Dell accountants, a month after winning a $100 million settlement from the company.
The complaint against former Dell chief accounting officer Robert Davis and former assistant controller Randall Imhoff says Davis misrepresented Dell's financial results by using various "cookie jar" reserves to cover shortfalls in operating results and engaged in other cash reserve manipulations from 2002-2005.
According to the SEC, Davis agreed to pay $175,000 penalty and to pay disgorgement and pre-judgment interest to settle the SEC's charges. Meanwhile, Imhoff, who was charged with aiding and abetting the Dell accounting scheme, also agreed to pay a penalty for $25,000.
The suit comes one month after the SEC charged the computer manufacturer with fraudulent financial reporting from 2002 and 2005. The SEC said the company used payments from Intel to meet analysts' targets on financial statements. Dell settled with the SEC for $100 million without admitting any wrongdoing, while Chief Executive Officer Michael Dell agreed to pay $4 million.
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In the complaint, the SEC says Davis directed the company's accountants to maintain the cookie jar funds, known to him as "contingencies," to cover future liabilities. For example, the SEC says rather than count excess funds it received from Dell Japan on its income statement in the fourth quarter of 2003; it used those funds to offset a litigation settlement two quarters later.
The complaint says Imhoff, under direction from his superiors, planned and issued instructions regarding Dell's build-up and use of cookie jar reserves. Imhoff worked for Dell from 2000 to 2007, while Davis was there from 1996 to 2005.
This complaint alleges the accused parties violated several SEC regulations including the Securities Exchange Act. Davis is not allowed to appear or practice before the SEC as an accountant for five years while Imhoff faces a three year ban.
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