A daily look at legal news and the business of law:

Dell Settles With the SEC

According to the Securities and Exchange Commission lawsuit that Dell (DELL) just settled for $100 million and a sweeping injunction, Dell cooked its books from 2002 to 2006 by using "exclusivity" payments from Intel (INTC) to inflate its revenue numbers and otherwise fraudulently meet Wall Street analysts' expectations. The payments reached as much as $720 million in a single quarter, and totaled $4.3 billion.

Intel paid Dell not to use the microchips manufactured by rival Advanced Micro Devices (AMD), but Dell didn't disclose that those payments made up a large share of its profits, nor, after Dell starting using AMD chips, did it reveal that the reduced payments were the source of its profitability decrease. Instead, Dell gave the credit, and the blame, to its own operations and management. In addition to the $100 million penalty to be paid by Dell, three executives agreed to pay penalties: Chairman and CEO Michael Dell and ex-CEO Kevin Rollins will each pay $4 million, and ex-CFO James Scheider will pay $3 million.

The penalties are accompanied by an injunction that bars Dell from violating several different provisions of the securities laws. While an injunction against breaking the law may not seem like much, in that the company neither admitted nor denied wrongdoing, it has at least one major consequence going forward: If Dell steps out of line in the future, the SEC can get an easy-to-obtain contempt of court order, rather than going through the much harder process of filing a new action. Because so many provisions of the securities laws are involved, Dell will surely take steps to clean up its accounting to ensure it stays in the clear.

In addition, the injunction undercuts the "neither admit nor deny" nature of the agreement: Courts don't give out injunctions, and companies don't agree to them, if no wrongdoing occurred.

If you think that Intel's payments to Dell to not use a competitor's chips raise antitrust concerns, you're right: Intel faces several antitrust cases, including one brought by the Federal Trade Commission, which assisted the SEC with the Dell case. Intel has already settled two antitrust cases related to the payments for a total of $2.7 billion.

SEC Allows Bond Issuers to Bypass Ratings Agencies

Now that the ratings agencies won't stand behind their ratings, the SEC is allowing bonds that once had to have a rating to be issued without one, reports The Wall Street Journal. The six-month waiver it has issued breaks a weeklong stalemate that had shut down parts of the bond market because the agencies feared being sued if they misrated bonds, and so refused to rate them at all.

Perhaps the ratings agencies are being smart, but I doubt it: With all the scandals about inflated ratings undermining the agencies' credibility, can it be good for their business to have successful offerings without ratings? Perhaps the ratings agencies will start defending their ratings and allowing them to be used in these offerings before investors get too comfortable with unrated bond issuances. If not, the ratings agencies will have to work that much harder to convince issuers that their services add value.

No Ruling on Arizona Immigration Law Yet

On Thursday, the Department of Justice and the state of Arizona argued in court over the constitutionality of Arizona's new immigration law. Judge Susan R. Bolton challenged both sides with her questions, but she was particularly skeptical about Justice's arguments. The argument concluded at 3 p.m., and Judge Bolton did not issue a ruling at that time. Because of the standard for granting injunctions, if the judge issues one, it means the federal government is likely to win. Without an injunction, the law will take effect in a week, which suggests a ruling could come at any time. Stay tuned.

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