Last month US PC Company Dell, agreed to pay over $100 Million dollars to settle an investigation into accounting fraud, bribery by Intel and company manipulation. Now the Company is under investigation for selling millions of faulty PCs and then trying to hide the fact.
Hundreds of those PC’s are believed to have been sold in Australia however Dell Australia and their PR Company Professional Public Relations are at this stage not returning our calls.
In the latest saga to hit the troubled PC Company whose products are now being sold at retailers like JB Hi Fi, OfficeWorks and Dick Smith after consumers deserted buying from the Company online, Dell has been accused of withholding evidence, including e-mails among its top executives, in a lawsuit over faulty computers it sold to businesses around the world.
The filing made in a US Court reveals that the total number of dodgy PC’s sold by Dell is as high as 11.8 million.
In the past when we have exposed Dell’s chequered history of fraud and manipulation both Dell and their PR Company have gone out of their way to deny us access to any form of Company information including product information.
A former Professional Public Relations executive said “PPR has been instructed to do anything to minimise the exposure of Dell in Australia where their brand is not as tarnished as Dell are in the USA”.
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In addition, Dell employees were encouraged to play down the problems when speaking to customers, according to documents syndicated in Australia. Dell told some customers about the problems, fixed their computers and extended its warranties on the systems.
According to the New York Times A.I.T. in its most recent filing, has produced communications that showed Dell’s management discussing how to frame the PC problems for investors, the news media and customers.
Mr. Dell and Mr. Rollins were informed by the vice president for investor relations, Lynn Tyson, in an August 2005 e-mail that Dell would “continue our reactive posture with the media” about the PC situation.
She told the executives that the public would hear that “the problem poses no risk of safety or data loss for our customers,” that “we have been working with our customers to resolve problems in the most effective manner possible” and that “we’re committed to fixing any systems that fail.”
According to the New York Times the court action taken out by Advanced Internet Technologies claim that Dell had deliberately violated a court order by failing to produce documents written by its executives, including the company’s chief executive and founder, Michael S. Dell who last month agreed to pay over $4 Million in fines after being accused of running a company that has, over several years, been improperly hiding the effect of massive payments from chip making giant Intel. The bribes which were as high as $720 Million a quarter were used inflate Dell’s earnings and which in turn related in investors being misled.
Despite the fines, evidence of systematic corruption and deliberate attempts to manipulate the truth the Dell board is still standing behind Michael Dell, which in light of the recent sacking of Hewlett Packard CEO Mark Hurd for associating with a soft porn actress and expenses irregularities shows Hurd’s actions were almost irrelevant.
Dell is claiming that they dispute the new accusation. Two years ago they also disputed that they were involved in fraud and manipulation.
David Frink, a Dell US spokesperson said “We take all court orders and our obligations to comply with them very seriously.”
Court documents reveal that millions of Dell PC’s had faulty parts and that the Company was grappling to isolate the problems in an effort to minimise risk to the Company.
But in its filing, A.I.T. claimed that Dell senior management including Michael Dell and the then CEO Kevin Rollins, knew of the severity of the problem.
Rollins has since quit the Company after being fined millions of dollars for his involvement with corrupt practises at Dell.
Affidavits filed with the US Court reveal that some of the company’s largest customers were affected by the problem. Some of those Companies operate in Australia.
Evidence has revealed that customers with faulty PCs have complained about data loss when their computers malfunctioned, and computer experts have since said that the electrical problems with the computers presented a limited safety risk.
The New York Times said that in June, a number of documents in the A.I.T. case were unsealed. They pointed to Dell’s struggles to deal with faulty components that plagued its OptiPlex computers from about 2003 to 2005. These same PC’s were being sold in Australia.
Internal Dell communications showed that lower-level employees had known that millions of PCs sold to businesses were likely to malfunction.
Dell has taken a $300 million charge related to the replacement of the bad computers.
Mr. Frink, the Dell spokesman, said the company had replaced 22 percent of the motherboards inside the OptiPlex computers shipping from 2003 to 2005 and added that only a small proportion of the computers had component problems.
Evidence reveals that customers complained that their computers were breaking at unprecedented rates and that Dell was not doing enough to fix the situation. The companies feared that their businesses could be disrupted at any time because of the machines.
Ironically the solicitors representing Dell in the lawsuit had to fight for Dell to fix 1,000 questionable computers and argued that its business had been put at risk.
“The problem was unquestionably the worst we have ever seen in this business,” said John Hess, the president of CompuCycle, a company who dealt with 5,000 faulty Dell machines. “I would suspect this has been part of the decline in Dell’s reputation.”
The problems with Dell’s OptiPlex business PCs were part of an industry wide dilemma caused by so-called bulging capacitors. The capacitors cost just a fraction of a penny each and helped control the flow of electricity to various computer components.
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