For Sam’s Valet

I’m sure NTodd won’t feel any glee at the news: N.Y. attorney general accuses Dell of fraud

Dell is being accused of making false promises to customers to drive sales, according to a lawsuit filed Tuesday by New York Attorney General Andrew Cuomo.

The court filing accuses Dell and Dell Financial Services of fraud, false advertising and deceptive business practices, including offering misleading financing, and failing to honor rebates, warranties and service contracts.

The state of New York is asking for an injunction of Dell’s allegedly bad business practices and an order that the world’s second-largest PC maker pay an unspecified amount of damages to customers found to be affected.

Dell spokesman Bob Pearson told CNET News.com that the company will contest the suit. “We are confident that our practices will be found to be fair and appropriate. While even one dissatisfied customer is too many, the allegations in the AG’s filing are based upon a small fraction of Dell’s consumer transactions in New York. We are committed to providing a positive experience to all of our customers every day,” he said in an e-mailed statement.

Pearson said the suit is not related to the Security and Exchange Commission’s investigation into Dell’s accounting practices. Dell’s own internal investigation into the matter yielded what its audit committee called “evidence of misconduct.” As a result of the SEC’s investigation, Dell has filed only preliminary quarterly financial reports for the past three quarters.

In December, analyst firm Friedman Billings Ramsey criticized the way Dell accounted for warranties, saying the company used an “unusual” method for accounting for the money it takes in from warranty sales and the money it reserves to handle expected warranty claims.

Actually this is a very old story at start-ups that become successful – the people who start the business decide to move on to other things and turn operations over to “professional managers” who proceed to milk the company for all of the profit possible, and destroy the reputation that was carefully built up over the years.

The “professional managers,” as a class, know more about the stock market than the market of the company they manage. They do things to impress market analysts, not their customers, because “professional managers” only actually sell one thing – stock.