Dell Computer CFO Don J. Carty attempted to appear less like a parent yesterday afternoon. At his press conference, he first tried to paint a picture of a company where little men made little adjustments to meet little targets, in the context of a big manufacturer with a big customer base and a big number of outstanding shares.But Carty doesn't wear the role of apologist well; in fact, from an historical perspective, he looks better as a father figure. In 2003, as the chairman and CEO of AMR, the parent company of American Airlines, Carty successfully negotiated a seemingly impossible deal between his company and a flight attendants' union, which was believed to have saved the company from bankruptcy. The thanks Carty got came by way of a note of congratulations from his successor, who took his job literally the following week.Don Carty may have fixed AMR; and amid the most conspicuous absence of CEO Michael Dell yesterday, he was clearly there to fix Dell. But one gets the feeling that he has assumed the temporary role of "Dad" in this dysfunctional family, to rescue his foster child from financial burden, only to exit the stage later once that child is well enough to resume his role in the world, where he can pretend such burdens don't really matter.So the little excuse about the lies Dell Computer told on its financial statements being small in the context of a big company, didn't fit this CFO. He did try to make the extent of the "irregularities" seem insignificant quantitatively. But then he started the long, arduous process of leading his foster child in the act of coming clean.For slightly more than four years, Dell's accountants and Carty's predecessors made adjustments to publicly reported earnings and profit/loss statements to make it appear that certain business segments were doing better than they actually were. The child had chocolate stains on his face, and it was now time to tell the story of where it came from.Robbing Peter to pay Peter"The investigation raised questions relating to numerous accounting issues, most of which involved adjustments to various reserves and accrued liability accounts," Carty stated, referring to the company's internal audit, which discovered irregularities in certain kinds of accounts payable. In other words, for certain accounting periods, company divisions may have had expenses that it chose to defer to later periods...which may have been deferred again, and so on."The investigation identified evidence that certain adjustments appear to have been motivated by the objective of attaining financial targets," the CFO continued. "According to the investigation, these activities typically occurred on or around quarter-end, and the investigation found evidence that in that time frame, account balances were reviewed sometimes at the request or sometimes with the knowledge of senior executives, with the goal of seeking adjustments so that quarterly performance objectives could be met. The investigation concluded that a number of these adjustments were improper, including the creation and release of accruals and reserves that appear to have been made for the purpose of enhancing internal performance measures or reported results, as well as transfers of excess accruals from one liability account to another, and the use of the excess balances to offset what were unrelated expenses in later periods."
