Dell Accused of Knowingly Shipping Faulty Desktops; Denies Wrongdoing

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by Jacqueline Emigh

Dell has publicly denied allegations leveled in a customer lawsuit that the PC maker deliberately shipped OptiPlex PCs with faulty motherboards from 2003 to 2005.

In a blog first posted on Dell’s Web site on July 1, and then updated twice, Lionel Menchaca, Dell’s “chief blogger,” acknowledged that some customers were affected by the motherboard problem. Yet he also contended that Dell “did not knowingly ship faulty motherboards.”

The lawsuit by Advanced Internet Technologies Inc. (AIT) is now three years old, but the case is back in the spotlight again since the New York Times’ recent publication of contents of previously sealed documents, unsealed last month by a federal court in North Carolina.

AIT, a Web hosting company that leased 2,098 OptiPlex desktop PCs in 2003 and 2004, also claimed that Dell breached its warranty agreement after finding that most OptiPlex computers had failed by November, 2004 due to faulty capacitors from Japanese supplier Nichicon.

Some of the documents filed by AIT in court also appear to raise questions over whether some Dell employees might have intentionally concealed the motherboard problem from customers.

In his blog post, Dell’s Menchaca pointed out that the capacitor issue was an industry-wide situation also impacting PCs from Hewlett-Packard, Apple, and other manufacturers.

Menchaca also maintained that not all OptiPlex customers were affected by the bad motherboards, and that Dell suspended use of Nichicon capacitors after discovering a problem in Nichicon’s manufacturing process.

“It’s also important to note that AIT was using the OptiPlex systems as servers, a use for which they weren’t designed. [AIT] also admitted in its complaint that Dell fulfilled its warranty obligations to AIT until AIT decided to stop paying for the OptiPlex computers,” according to Menchaca.

In the original case filed in 2007, [PDF] AIT referenced a suit by shareholders against Dell — Amalgamated Bank, et al. v. Dell, Inc., et al — alleging that Dell “knew long before the 3rdQ F05 that it had problems with the OptiPlex GX270 and GX280, and that “[b]y 2/05, Dell was replacing all motherboards with no questions asked.”

In the New York Times story by Ashlee Vance, the reporter quoted from several e-mails and other documents unsealed in June, including an e-mail purportedly circulated among Dell sales reps about a disgruntled customer. “We need to avoid all language indicating the boards were bad or had ‘issues’ per our discussion this morning,” the e-mail allegedly read.

The renewed attention to the AIT lawsuit comes after Dell’s recent disclosure that it has reserved $100 million to pay for a potential settlement of a case involving an investigation by the Securities and Exchange Commission (SEC) into alleged accounting irregularities between 2002 and 2006.




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