Dell 2010 Annual Report Download - page 95

Download and view the complete annual report

Please find page 95 of the 2010 Dell annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 154

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
of Fiscal 2008. Dell subsequently restated its annual and interim financial statements for Fiscal 2003, Fiscal 2004, Fiscal 2005,
Fiscal 2006, and the first quarter of Fiscal 2007.
On July 22, 2010, Dell reached a settlement with the SEC resolving the SEC's investigation into Dell's disclosures and alleged
omissions prior to Fiscal 2008 regarding certain aspects of its commercial relationship with Intel Corporation ("Intel") and into
separate accounting and financial reporting matters. The SEC agreed to settlements with both the company and Michael Dell, who
serves as the company's Chairman and Chief Executive Officer. The company and Mr. Dell entered into the settlements without
admitting or denying the allegations in the SEC's complaint, as is consistent with common SEC practice.
Under its settlement, the company consented to a permanent injunction against future violations of antifraud provisions, non-
scienter (negligence) based fraud provisions and other non-fraud based provisions related to reporting, the maintenance of accurate
books and records, and internal accounting controls under Section 17(a) of the Securities Act of 1933 (the "Securities Act"),
Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rules 10b-5,
12b-20, 13a-1 and 13a-13 under the Exchange Act. The company also agreed to perform, and has initiated, certain undertakings,
including retaining and working with an independent consultant, to enhance its disclosure processes, practices and controls.
Pursuant to the settlement terms, the company expects to have completed or implemented these undertakings within 36 months after
court approval of the settlement on October 13, 2010. In addition, the company paid into an escrow account a civil monetary penalty
of $100 million and discharged the liability during the second quarter of Fiscal 2011.
The SEC's allegations with respect to Mr. Dell and his settlement were limited to the alleged failure to provide adequate disclosures
with respect to the company's commercial relationship with Intel prior to Fiscal 2008. Mr. Dell's settlement did not involve any of
the separate accounting fraud charges that were settled by the company. Moreover, Mr. Dell's settlement was limited to claims in
which only negligence, and not fraudulent intent, is required to establish liability, as well as secondary liability claims for other non-
fraud charges. Under his settlement, Mr. Dell consented to a permanent injunction against future violations of these negligence-
based provisions and other non-fraud based provisions related to periodic reporting. Specifically, Mr. Dell consented to be enjoined
from violating Sections 17(a)(2) and (3) of the Securities Act and Rule 13a-14 under the Exchange Act and from aiding and abetting
violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 under the Exchange Act. In addition, Mr. Dell
agreed to a civil monetary penalty of $4 million. The settlement does not include any restrictions on Mr. Dell's continued service as
an officer or director of the company.
The independent directors of the Board of Directors unanimously determined that it is in the best interests of Dell and its
stockholders that Mr. Dell continue to serve as the Chairman and Chief Executive Officer of the company.
The settlements with the company and Mr. Dell were approved by the U.S. District Court for the District of Columbia on
October 13, 2010.
Securities Litigation — Four putative securities class actions filed between September 13, 2006, and January 31, 2007, in the U.S.
District Court for the Western District of Texas, Austin Division, against Dell and certain of its current and former directors and
officers were consolidated as In re Dell Securities Litigation, and a lead plaintiff was appointed by the court. The lead plaintiff
asserted claims under Sections 10(b), 20(a), and 20A of the Exchange Act based on alleged false and misleading disclosures or
omissions regarding Dell's financial statements, governmental investigations, internal controls, known battery problems and
business model, and based on insiders' sales of Dell securities. This action also included Dell's independent registered public
accounting firm, PricewaterhouseCoopers LLP, as a defendant. On October 6, 2008, the court dismissed all of the plaintiff's claims
with prejudice and without leave to amend. On November 3, 2008, the plaintiff appealed the dismissal of Dell and the officer
defendants to the Fifth Circuit Court of Appeals. The appeal was
91