In Reply to: Just not what IBM needed posted by Jack on 09 January 2004 at 08:57:38:
Associated Press
SEC Mulls Civil Charges Against IBM Corp.
Thursday January 8, 7:23 pm ET
SEC Mulls Civil Charges Against IBM Corp. for Allegedly Violating Accounting Rules
NEW YORK (AP) -- Federal investigators are considering filing civil charges against IBM Corp. for violating accounting rules in an $11 million transaction with a customer, Dollar General Corp., IBM revealed Thursday.
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IBM acknowledged that it had received a "Wells Notice" from the Securities and Exchange Commission, which began looking into the transaction as part of a larger probe into Dollar General's accounting. IBM said an employee in its retail stores solutions unit had also gotten a Wells Notice.
Dollar General, a Tennessee-based chain of retail stores, has acknowledged overstating profits by $100 million from 1998 to 2000, and agreed last year to pay $162 million to settle related shareholder lawsuits.
IBM said SEC staff had found that Big Blue may have aided Dollar General's 2000 earnings misstatement when it paid $11 million to Dollar General for used computing equipment as part of a deal in which Dollar General also bought new equipment from IBM.
When SEC staff deliver a Wells Notice, the company or people involved have a chance to defend themselves and possibly avoid formal charges. The SEC is prohibited from disclosing the issuances of the notice, but the companies involved are generally required to do so.
The Dollar General probe sparked a wider SEC investigation into how IBM booked customer transactions in 2000 and 2001. IBM said in a statement that it was cooperating with both probes.
IBM spokesman Edward Barbini declined to comment further.
Andrea Turner, spokeswoman for Goodlettsville-based Dollar General, said the company hasn't received any notices from the SEC.
As to the investigation, she noted it has been ongoing since April 2001. "This is really old news for us. We've completed the restatement and have an entirely new management team."
IBM shares gained 26 cents to close at $93.04 in trading Thursday on the New York Stock Exchange before the SEC notice was disclosed. The shares were halted briefly in after-hours trading, and fell 59 cents when trading resumed. Dollar General shares fell $1.17, or 5 percent, in extended trading, after finishing the regular session up 71 cents at $21.67 on the NYSE.