Dell and Intel accused of pump-and-dump scam

A group of investors has filed suit against Dell and Intel, alleging that the companies have pulled "one of the largest insider trading 'pump-and-dumps' in history".

The lawsuit, filed in a US District Court in Texas, alleges that Dell executives created inflated financial reports propped up by hundreds of millions of dollars in secret kickback payments from Intel.

The executives are accused of using the company's artificially inflated stock prices to sell off roughly $3.3bn in stock between 2003 and 2005.

The suit further alleges that Intel provided $200m per quarter in secret payments to ensure that Dell would exclusively use Intel processors in its PCs.

Those payments were then used to prop up Dell's financial reports, and were disguised as the benefits of Dell's cost-cutting and direct business model while executives sold off virtually all their company stock, the plaintiffs claim.

Dell is remaining tight-lipped on the case. The company did not respond to a request for comment from vnunet.com, and previous reports cite the company as declining to comment on the case. 

Intel, however, moved quickly to publicly deny the allegations. A spokesman told vnunet.com that the allegations "appear to have been completely made up".

"We have conducted a preliminary analysis of the complaint," he said. "Intel denies the plaintiffs' allegations and we plan to move quickly to defend ourselves."

The spokesman added that Intel has not been implicated in any way with the current Securities and Exchange Commission investigation into Dell's accounting practices.

The suit was filed by the firm of Lerach Coughlin Stoia Geller Rudman & Robbins LLP on behalf of a pair of investment and collection funds from the US and the UK.

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