Dell: 'Evidence of Misconduct' in Financial Reports

In an acknowledgment this afternoon that the worst may yet come to pass, Dell Computer stated its audit committee looking into irregularities in its financial reporting in advance of an SEC investigation, "has identified a number of accounting errors, evidence of misconduct, and deficiencies in the financial control environment."

As a result, the company may be venturing into dangerous territory further than any other US publicly traded company has gone before, by stating now it doubts it will be able to file its annual 10-K report for the last fiscal year even by the typical extended deadline of April 18, were it to ask for an extension.

In a statement this afternoon, the audit committee's chairperson, Thomas Luce, said, "As we move toward the conclusion of our investigation, we are committing the time and resources required to ensure a thorough and comprehensive review and resolution of all identified issues and the implementation of appropriate remedial measures."

Two months ago, Dell CEO Kevin Rollins resigned, and founder Michael Dell returned to his old seat, ostensibly to purge the ills that have plagued his company. He's looking to build what he calls "Dell 2.0," though he's familiar enough with the development process to know that he may have to spend a lot of time debugging his predecessor's version 1.1.

A lawsuit brought by Dell's investors against the company last month alleges that Rollins was personally involved in a scheme to artificially inflate the value of the company, using as much as $1 billion in kickbacks that shareholders believe came from Intel, paying Dell back for its once-exclusive purchases of Intel CPUs.

Intel has flatly denied the allegations, saying they appear completely made up; although Dell Computer has yet to address these allegations specifically. It's against this backdrop that Dell's acknowledged "evidence of misconduct" appears most daunting.

The late news sent Dell's stock value down as much as 7%, before it bounced back in after-hours trading.

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