Investors in Dell are suing the company, accusing it of improperly accounting for bonuses it received from Intel for using its chips exclusively. The suit, which seeks class action status, claims the profits of the company were artificially inflated.

Dell could have been receiving as much as $1 billion per year in kickbacks, which were not properly accounted for and would likely be illegal under U.S. law. Furthermore, this could have hid more serious financial issues at the Texas-based computer maker.

Plaintiffs argue it did just that, and that the company became dependent on them to help it report positive results to its investors. In addition, they claim Dell had been planning machines with AMD chips since 1999, although Intel would successfully quash any plans to release them.

Accounting, quality and customer service issues were hidden from investors, and Intel is accused of being a conspirator in a plan to defraud Dell investors. In any case, as these issues were occurring, Dell executives were selling billions of dollars in stock, the suit alleges.

Thusly, 16 executives were named in the lawsuit, including founder Michael Dell and recently exited CEO Kevin Rollins. Additionally, company accountant PricewaterhouseCoopers has been named as a defendant. The suit was filed in U.S. District Court in Austin, Texas.

For the most part, those involved were not commenting on the suit, although Intel denied any wrongdoing and promised to defend itself against the charges. It even suggested that some of the issues raised in the complaint were "completely made up."

Indications that Dell was suffering from accounting issues first surfaced in August, when it admitted to a Securities and Exchange Commission investigation into the matter, which has since been expanded. Dell had also been subpoenaed by the U.S. attorney for the Southern District of New York.

1:40 pm ET 2 February 2007 - In a statement just released to BetaNews, Intel spokesperson Chuck Mulloy said the following:

"We've conducted a preliminary review of the complaint. At first glance, it appears the allegations with respect to Intel were completely made up. While the plaintiff rehashes antitrust allegations from other cases, there is no antitrust claim in this case.

"We deny the plaintiff's allegations," Mulloy continued, "and plan to move quickly to defend ourselves." He added that Intel has never been contacted or received any inquiry from the US Securities and Exchange Commission or the Dept. of Justice with regard to Dell's accounting, which has been under investigation by those agencies for at least several months, if not longer. The existence of the investigation was revealed by Dell Computer last August. Had Intel been a subject of concern regarding Dell's accounting practices, he said, Intel would probably have been contacted by now.

A spokesperson for AMD had no comment on the matter this afternoon, other than to say the company is reviewing the complaint carefully.