The Securities and Exchange Commission on Aug. 27 charged former Dell Chief Accounting Officer, Robert Davis, for his role in the company's accounting fraud. The charges come after the SEC in July charged Dell with fraud for materially misstating its operating results from fiscal year 2002 to fiscal year 2005.

The SEC's complaint against Davis, filed in federal district court in Washington, D.C., alleges that he directed the use of "cookie jar" reserves, which he referred to as "contingencies," to cover shortfalls in operating results and engaged in other reserve manipulations. The SEC's complaint further alleges that the reserve manipulations allowed Dell to materially misstate its operating expenses as a percentage of revenue—an important financial metric that Dell highlighted to investors. The manipulations also enabled Dell to materially misstate the operating income of its Europe, Middle East and Africa segment.

More Charges

In a separate complaint also filed in federal district court in Washington, D.C., the SEC alleges that Dell Assistant Controller, Randall Imhoff, aided and abetted Dell's improper use of "cookie jar" reserves and other reserve manipulations to cover shortfalls in Dell's operating results from fiscal year 2002 to fiscal year 2004. The SEC's complaint alleges that Imhoff, acting under his supervisors' general direction, planned and issued instructions regarding Dell's build-up and use of cookie jar reserves. In an example of his involvement in Dell's other improper reserve manipulations, the SEC's complaint alleges that Imhoff failed to ensure that Dell increased its reserves, as required by GAAP, after learning that an accrual to cover the costs of closing a Dell facility in Texas was inadequate.Charges Brought

Without admitting or denying the SEC's allegations, agreed to pay a penalty of $175,000, disgorgement of $19,080, and prejudgment interest of $9,078. In his settlement offer, Davis also consented to being suspended from appearing or practicing before the SEC as an accountant, with the right to apply for reinstatement after five years.

In addition, Imhoof, without admitting or denying the SEC's allegations, agreed to pay a penalty of $25,000, disgorgement of $12,852, and prejudgment interest of $6,197. In his settlement offer, Imhoff also consented to being suspended from appearing or practicing before the SEC as an accountant, with the right to apply for reinstatement after three years.