Unsealed court documents reveal Dell knew it sold faulty computers

Documents recently unsealed in a three-year old court case against Dell Computer indicated that the company sold millions of computers with faulty parts, knowing full well that the components inside were faulty.

First reported by the New York Times, the computers were sold in a two-year period from 2003 to 2005, and were sold to educational institutions, large companies such as Wal-Mart and Wells Fargo, organizations such as the Mayo Clinic, and others.

The company's line of OptiPlex computers were affected most by the problems. At fault were bad capacitors on its motherboards, which were reportedly problematic for other manufacturers as well. For whatever reason though, Dell seemed to have problems more frequently.

An internal study indicated that as many as 97 percent of OptiPlex computers were expected to have some type of issue over a three year period, meaning just about every computer it shipped was defective.

Instead of attempting to fix the issue, Dell tried to hide it, court documents show. It even instructed customer support representatives to "avoid all language" that would indicate any problems with the boards. Other documents indicate that Dell employees were to act as if they didn't know the cause of the problem -- when many did -- and not share information "proactively."

Capacitors had been known to leak, and in some cases could pose a fire risk. The problems also posed a data loss risk, although the computer manufacturer made a concerted effort to play down any possible issues.

Dell had set aside $300 million in 2005 to fix the problem but that was not enough to stave off the lawsuit which was filed in 2007 by Internet services company AIT. Documents in the case were then sealed by protective order until this month.

Either way, the release of these documents show that Dell is still struggling to regain its standing in the computer industry that it once enjoyed. Over the last several years, it has been pummeled by questions over its business practices and integrity, damaging the company's overall brand.

Shareholders sued the company in 2007 in response to the company's admission that it had found "evidence of misconduct" in its financial reports. Michael Dell himself is also in hot water over these bookkeeping issues, and could face fraud and misconduct charges for his involvement.