New York Sues Dell For Deception

Dell computer company graphic logo
New York Attorney General Andrew Cuomo filed a lawsuit Tuesday against Dell Inc., accusing the personal computer maker and its financial services affiliate of deceiving customers to increase sales.

The lawsuit filed in Albany County Supreme Court claims that Dell and Dell Financial Services LP have engaged in fraud, false advertising and deceptive business practices, The Wall Street Journal first reported on its Web site late Tuesday.

The lawsuit accuses Round Rock, Texas-based Dell of attracting customers with misleading financing terms, rebates and other benefits, but ultimately sticking them with high interest on lines of credit. It also claims that Dell avoids giving customers rebates through various tactics and fails to honor warranties and service contracts by misleading customers and making it difficult for them to obtain technical support.

John Milgrim, spokesman for Cuomo, confirmed Wednesday the suit was filed but declined to discuss details. Court officials said the case had not yet been assigned to a judge and documents were not publicly available.

Dell spokesman Bob Pearson said in a written statement that the company's conduct has been honorable.

"Our customers are our top priority at Dell," Pearson said. "We will vigorously defend ourselves in court. 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."

The lawsuit seeks an order requiring Dell to pay unspecified damages to affected customers, a $500 payment to the state for each instance of some violations, and another $2,000 for additional costs.

In an unrelated probe, the Securities and Exchange Commission and Dell's own audit committee have been investigating the company's accounting practices.

In recent months, Dell has seen a management shake-up that included the departure of several top executives — including Chief Executive Officer Kevin Rollins and Chief Financial Officer Jim Schneider — and the return of Michael Dell as CEO.

With Dell at the helm, the company has been trying to orchestrate a turnaround plan to improve customer service and combat Hewlett-Packard Co. and other electronics manufacturers who have eaten into Dell's market share with low-cost, low-profit PCs.