Wednesday, May 16, 2007

New York Sues Dell for Fraud

Ben Ames, IDG News Service

The New York attorney general has filed a lawsuit charging that Dell Inc. used fraud and false advertising to increase profits on PC sales.

New York state Attorney General Andrew Cuomo filed the lawsuit in Albany County Supreme Court on Tuesday, according to the county clerk's office. Cuomo plans to give more details at a press conference on Wednesday.

A report in The Wall Street Journal, however, said that the lawsuit alleges that Dell misled its customers by applying high credit rates to their computer purchases although it had promised cheap financing. The suit also alleges that Dell failed to deliver rebates, warranties and technical support as simply as it had promised, the report said.

Dell denies the charges and plans to fight the suit, according to an e-mailed statement from spokesman Bob Kaufman.

"Dell will vigorously defend itself in court," Kaufman said. "We are confident that our practices will be found to be fair and appropriate. While even one dissatisfied customer is too many, the allegations in the AG's filing are based upon a small fraction of Dell's consumer transactions in New York."

The charges strike directly at the improved marketing image Dell has tried to build in recent months. After several quarters of disappointing sales in 2006, Dell promised to rebuild itself by investing US$100 million to improve customer service and by eliminating its complex rebate system in favor of more predictable prices.

Dell also fell behind rival Hewlett-Packard Co. in market share last year, dismissed its CEO in January and struggled with a financial investigation by the U.S. Securities and Exchange Commission (SEC). The company has missed the deadlines for filing its last two quarterly earnings reports, and admitted in March that its own internal investigators had found evidence of accounting misconduct.

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