A New York State Supreme Court said Tuesday that Dell and its financial services arm misled customers.
Judge Joseph Teresi ruled that the world's second-largest PC maker engaged in fraud, false advertising, deceptive business, and abusive debt collection practices. The company was accused by the state of New York of offering no-interest or no-payment financing options for its products while Dell Financial Services would fail to honor them.
New York Attorney General Andrew Cuomo filed the suit in May 2007, asking for an injunction against the company's business practices and monetary damages for affected customers.
Further court proceedings will need to be held to determine what those damages will be.
Dell told Reuters it "disagrees" with the ruling. "We are confident that when the proceedings are finally completed, the court will determine that only a relatively small number of customers have been affected," according to the company's statement.
Dell is being sued by New York Attorney General Andrew Cuomo for making false promises to customers to drive sales, The Wall Street Journal reported Tuesday evening.
A 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 said 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.
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