Cuomo Kicks Dell When It's Down

(page 2 of 2)

While even one dissatisfied customer is too many, the allegations in the Attorney General's filing are based upon a small fraction of Dell's consumer transactions in New York. We are committed to providing a positive experience to all of our customers every day."

"The Dell guys are frankly a little puzzled by all this," says industry analyst Roger Kay of Endpoint Technologies. "They see this as an old problem that they're in the process of fixing, and the burden of proof to show Dell was malicious about this is going to be high. Bad service in and of itself isn't a crime. Dell has certainly been humbled in the marketplace by recent events, but this suit seems to me like a bit of dogpiling."

More Scrutiny on Dell Financial

Whatever it is, Cuomo's attention also shines the spotlight on Dell Financial Services, the company's little-known joint venture with CIT Group (CIT). It's an entity that Dell doesn't actively run, but it controls 70% of the equity. Dell also has the right to purchase the remaining share from CIT in 2008 for between $100 million and $345 million. In the case of a consumer loan, the customer agrees to take out credit from a CIT-owned bank, not from Dell.

The lawsuit accuses Dell of actively promoting on-site repair services as part of a service plan offered to customers, but says those same customers were often pressured to open up their own computers and try to execute the repairs themselves, guided over the phone by technicians.

Cuomo is heading into the case with more than 700 complaints in hand and has set up a Web site (www.nyagdell.com) that a spokeswoman said was attracting roughly one new complaint every minute. By the end of the day on May 17, Cuomo's office had received another 575 complaints, with more expected.

Dell's troubles would mount should other states follow New York's lead. Cuomo spokeswoman Rashmi Vasisht said that Cuomo's office is communicating with the attorneys general of other states about the case. She declined to elaborate on the discussions. Calls to the offices of California Attorney General Jerry Brown and Connecticut Attorney General Richard Blumenthal weren't immediately returned.

Hesseldahl is a reporter for BusinessWeek.com.