Federal investigators are considering filing civil charges against IBM Corp for violating accounting rules in an US$11 million transaction with a customer, Dollar General Corp, International Business Machines Corp. revealed Thursday.
IBM acknowledged that it had received a "Wells Notice" from the Securities and Exchange Commission, which began looking into the transaction as part of a larger probe into Dollar General's accounting.
IBM said an employee in its retail stores solutions unit had also gotten a Wells Notice.
Dollar General, a Tennessee-based chain of retail stores, has acknowledged overstating profits by US$100 million from 1998 to 2000, and agreed last year to pay US$162 million to settle related shareholder lawsuits.
IBM said SEC staff had found that Big Blue may have aided Dollar General's 2000 earnings misstatement when it paid US$11 million to Dollar General for used computing equipment as part of a deal in which Dollar General also bought new equipment from IBM.
When SEC staff deliver a Wells Notice, the company or people involved have a chance to defend themselves and possibly avoid formal charges.
The SEC is prohibited from disclosing the issuances of the notice, but the companies involved are generally required to do so.
The Dollar General probe sparked a wider SEC investigation into how IBM booked customer transactions in 2000 and 2001. IBM said in a statement that it was cooperating with both probes.
IBM spokesman Edward Barbini declined to comment further.
Dollar General did not immediately return calls seeking comment.
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