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Quick Hits: Dell Takes Page from Madoff Playbook


Brief scrutiny of today's headlines.

Bernard Madoff notwithstanding, defrauding consumers is not a viable business practice - an important lesson, to be sure, and one which Dell (DELL) has now learned the hard way.

The company will pay $3.9 million to settle a 46-state lawsuit that charges the PC-maker of defrauding consumers about financing terms, warranties and rebates - including a zero-percent financing offer that did not, strictly speaking, exist. Instead, customers found themselves barraged by high interest rates, hidden fees, and mysteriously voided warranties.

The company will also pay at least $1.5 million to compensate consumers, and $1.85 million to finance states' continuing investigations into Dell's business practices.

In a prepared statement, Connecticut Attorney General Richard Blumenthal said that an "epidemic-like wave of complaints" about Dell provoked him to launch a nationwide investigation in concert with other states' attorneys general.

Following the settlement, Blumenthal said, "More than the money, this agreement provides profoundly important business practice reforms."

What reforms, you may ask? Well, for example, the settlement stipulates that, in order to describe its customer service as "award-winning," Dell needs to have actually won such an award.

An outrageous requirement, to be sure.

Dell customers who bought a computer on or after April 1, 2005 can file a claim with their state attorney general within the next 90 days.
No positions in stocks mentioned.

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