Risk Management

2 Accountants Settle SEC Charges in Dell Case

Regulator claims three traded in shares illegally in 2005. Case against a third employee continues.
Stephen TaubOctober 1, 2007

Three men who were accountants at Dell Inc. in 2005 were charged by the Securities and Exchange Commission with illegally trading on insider information, and two of them agreed to settle the charges.

According to the SEC, Salvador Chavarria, John A. Nieto, and Glenn D. Leftwich worked as accountants in the Dell Americas business unit at its corporate headquarters in Round Rock, Tex., when they illegally traded shares of the computer maker in advance of an Aug. 11, 2005, public announcement. On that day, Dell disclosed that its revenues for the second quarter of fiscal 2006 had fallen short of the company’s earlier guidance and analysts’ expectations.

The SEC said that the three conducted illegal trades by purchasing Dell put options. When they sold the options, Chavarria made $153,240, Leftwich $81,658, and Nieto $16,677.

In addition, on Oct. 31, 2005 Leftwich bought Dell put options prior to a negative Dell earnings announcement, according to the SEC’s complaint, which said Leftwich sold the puts on the following day and made $24,769.

In settling, Chavarria agreed to pay $153,240 in disgorgement, $16,673 in prejudgment interest, and a civil penalty of $153,240; Nieto agreed to pay $16,677 in disgorgement, $2,059 in prejudgment, and a civil penalty of $16,677. The two did not admit to or deny the allegations.

In its continuing case against Leftwich, the SEC is seeking a permanent injunction, disgorgement plus prejudgment interest, and a civil penalty.

Responding to a request for information, a Dell public relations official would not say whether Chavarria, Nieto, and Leftwich are still working there, noting a Dell policy to “not comment on individual employees or former employees.” The spokesman did say that Dell had been contacted by the SEC over a year ago, and “we’ve cooperated with all SEC inquiries.”