SEC probing IBM, Dollar General transaction

IBM Corp. has received an indication from the U.S. Securities and Exchange Commission (SEC) that the federal regulator is considering a civil action against the company for possible violation of U.S. securities law.

The company on Thursday said it had received a “Wells Notice” from the SEC. The notice is in relation to an investigation into how an IBM customer, Dollar General Corp., accounted for a specific transaction with IBM’s Retail Stores Solutions unit. The SEC is trying to determine whether IBM’s unit, which sells electronic cash registers, had any illegal involvement in Dollar General’s misstatement of its 2000 results in regard to that transaction, the company said.

In a separate statement, Dollar General, of Goodlettsville, Tennessee, said it had also received a Wells Notice from the SEC about the Jan. 14, 2002 restatement of its financial results for the company’s fiscal years 1998 through 2000.

As explained by the SEC on its Web site, under the Wells process, individuals involved in an investigation are invited to present written statements to the Commission explaining why they believe the SEC should not bring an enforcement action against them before SEC staff make a formal recommendation for or against civil action.

Representatives from IBM, Dollar General and the SEC could not immediately be reached for comment. No timeline was given for the investigation or when charges may be filed against IBM.

According to IBM, the Armonk, New York, company paid Dollar General $11 million for “certain used equipment as part of a sale of IBM replacement equipment in Dollar General’s 2000 fourth fiscal quarter.” IBM revealed it was being investigated by the SEC over the matter last June.

Along with the corporation, an IBM employee in its Sales and Distribution unit has also received a Wells Notice from the SEC in connection with the investigation, IBM said.

IBM is cooperating with the SEC on the Dollar General investigation as well as on a separate SEC investigation relating to the recognition of revenue by IBM in 2000 and 2001 involving “certain types of customer transactions, which is not the subject of this Wells Notice,” IBM said.

The announcement comes just days after IBM’s Korean subsidiary announced the dismissal of three of its employees, including an executive, who have been indicted on charges of using bribery to secure government contracts.