International Business Machines Corp. said Thursday that federal regulators may file a civil lawsuit against the computer giant, charging that it helped a customer misrepresent financial results.
IBM said it had been issued a "Wells Notice" by the Securities and Exchange Commission, which means the agency is likely to file civil charges. The notice relates to the SEC's investigation of Dollar General's purchase of IBM digital cash registers.
IBM said in a statement that the SEC is considering taking action against IBM for possible violation of U.S. securities laws, "by participating in and aiding and abetting Dollar General's misstatement of its 2000 results."
IBM first disclosed the Dollar General investigation in June 2003 and said it has been cooperating fully with federal regulators.
In the transaction in question, IBM paid Dollar General $11 million for certain used equipment as part of a sale of IBM replacement equipment. The transaction took place in Dollar General’s fiscal fourth quarter in 2000, according to IBM.
Big Blue’s own accounting has come under scrutiny over the years, with investors criticizing the company for its lack of disclosure. In the past couple of years, however, IBM has addressed some of those concerns by disclosing more financial information.
In April 2002, the SEC disclosed that it had opened and closed a preliminary inquiry into IBM, but did not specify the focus of that investigation.
IBM, which always has defended its accounting practices, said it continues to cooperate with a separate SEC investigation focusing on the way it recognized revenue in 2000 and 2001.
The Wells Notice follows the disclosure Monday that 48 South Korean government officials and corporate executives, mainly from IBM ventures, had been charged with bribery in a case involving state contracts for computer parts and servers.
IBM Korea said it had fired some staff involved in the case.
IBM dominates the market for point-of-sale systems, and its customers include major retailers in the United States, a number of which are being scrutinized by U.S. regulators for accounting practices.
Shares of IBM rose 26 cents to close at $93.04 on the New York Stock Exchange, before the news was announced. Trading in IBM stock was halted after U.S. markets closed pending the announcement.