Dell denies New York Att. Cuomo's fraud charges

New York Attorney General Andrew Cuomo on Wednesday file a lawsuit against Dell Inc. and Dell Financial Services LP, an affiliate that is a joint venture between Dell and CIT Bank, accusing computer maker and its financial services affiliate of engaging in "bait and switch" financing tactics and failing to provide their customers with adequate customer service.

In the lawsuit, filed yesterday in state Supreme Court in Albany County, Cuomo claimed that Dell and its DFS business are engaged in deceptive practices, including misleading promises of financing terms and interest rates, to sell computers.

Cuomo, who has sued Round Rock, Texas-based Dell over consumer complaints against the computer maker, said Dell lures customers with zero percent financing but, at the time of purchase, tricks them into higher interest rates, often without their knowledge.

In a news conference Wednesday in New York, the state Attorney said that his office has so far received approximately 700 complaints against Dell, and the figure is still growing rapidly.

"Dell must respect consumer protection laws," Cuomo said at the news conference adding that Dell should "Either truly offer the zero-percent financing and provide the promised customer service, or stop offering and selling such packages."

Cuomo now requires Dell and DFS to pay restitution to hundreds of consumers, who say they were charged for services they didn't get, put into high-rate financing plans without their permission or given the runaround when they applied for promised rebates.

The suit also calls for PC company to pay civil penalties, and adopt measures to ensure the company does not engage in "deceptive, illegal, and fraudulent practices in the future."

New York Attorney General's office is seeking US$500 for each case of certain violations, $2,000 for costs and other unspecified damages.

The lawsuit also accuses Dell and DFS of perpetuating numerous other misleading business practices relating to their technical support services, promotional financing, rebate offers, and billing and collection activity.

Dell, which is currently the second-largest PC seller in the world and has a 15.2% share of the overall PC market, has denied the charges and called Cuomo's charges “based on a small fraction" of Dell's consumers in the state.

"Our customers are our top priority at Dell," says Dwayne Cox, senior spokesman at Dell's headquarters. "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 (Cuomo's) filing are based upon a small fraction of Dell's consumer transactions in New York."

Michael Dell stepped aside as Chief Executive Officer (CEO) on July 16, 2004, but retained his position as Chairman of the Board. Kevin Rollins, who had held a number of executive posts at Dell, replaced Dell as CEO.

On Jan.31, 2007, Dell fired Rollins and Michael Dell re-claimed the company's chief executive spot. Previously holding a substantial lead in PC sales, Dell during the leadership of Rollins slipped behind Hewlett-Packard in this market.

Dell faced a rough time under Rollins as it lost the PC market lead to HP in the second half of 2006. Dell watched its core business shrink as it got entangled in accounting problems that caused the company to miss financial filing deadlines.

After the news of lawsuit, Dell shares rose early, and were up by 89 cents at $25.56 in afternoon trading Wednesday.