Opinion ID: 36872
Heading Depth: 3
Heading Rank: 2

Heading: Dell Investigates Suspicious Deals Involving Rodriguez and Terminates Him

Text: 14 On May 6, 1998, three months after the parties signed the Separation Agreement but almost two months before its effective date, Dell wrote to Rodriguez informing him that Dell had been conducting a wide-ranging examination of Dell Spain, and that it revealed specific irregularities which appear to have been within [Rodriguez's] responsibility. The May 6 letter identified eight separate irregularities under investigation. 15 Dell uncovered these improprieties when it began negotiating the severance of Bienvenido Valero, the finance manager for Dell's operation in Spain. In the course of those negotiations, Valero produced an employment contract dated 1992 (the Valero Contract), purportedly signed by Rodriguez, granting Valero a $1.7 million golden parachute in the event he was terminated. Dell had not previously seen the 1992 Valero Contract. Before Valero produced a copy of that agreement, Dell was aware of only a standard employment agreement of indefinite duration dated June 1991, which entitled Valero to only a limited severance as required under Spanish law. 3 When Dell became suspicious of the authenticity of the Valero Contract and asked Rodriguez to authenticate his signature on it, Rodriguez responded by stating only, I don't know. It's a photocopy. Dell commissioned two handwriting experts to analyze the signatures on the Valero Contract; they concluded that the document was signed in 1997, not 1992 as indicated by its date. 16 Dell then initiated a thorough audit of Rodriguez's activities and learned that he had engaged in several questionable financial transactions with friends and family members in contravention of Dell's policies and practices. Included in these suspect transactions were payments of some $23,000 to an employment agency called Powerline. After further investigation, Dell learned that these payments were supposedly made for the services of Rodriguez's sister-in-law. Dell also discovered that Rodriguez had authorized payments of approximately $2,400 per month to a company called POAS for salary and office rent in the Canary Islands, where Dell did not maintain an office. It turned out that the managing director of POAS was Rodriguez's brother. Similarly, Dell determined that Rodriguez had authorized installation and maintenance payments of about $300,000 to I.B. y Asociados. When Dell questioned Rodriguez about the I.B. y Asociados payments, however, he explained that they were for consultancy and lobbying commissions. 17 In light of these and other dubious transactions, Dell informed Rodriguez in the May 6 letter that all of his legal entitlements from Dell were being suspended pending an evidentiary hearing and review by Dell's Ethics Committee. Rodriguez disputed all of Dell's allegations and met with its representative to explain how the transactions were legitimate and justified. 18 In June 1998, after reviewing Rodriguez's conduct, Dell's Ethics Committee concluded that he had breached his obligations to Dell. In a letter dated June 26, Dell informed Rodriguez that the Ethics Committee had found unanimously that the evidence presented justified the termination of all legal relationships between the parties and further recommended the termination of the contractual relationship between [Rodriguez] and Dell Espana S.A. 19 3. Rodriguez Exercises His Stock Options, and Dell Initiates Criminal and Civil Proceedings in Spain 20 Two days after receiving Dell's June 26 letter, Rodriguez exercised numerous stock options under various SOAs, with the aggregate value of approximately $1.08 million. On July 13, July 20, and July 24, Rodriguez called his broker and exercised additional options worth some $753,000, $114,000, and $780,000, respectively. In all, Rodriguez realized profits of $2,728,898.11 on the exercise of these stock options. 21 In the fall of 1998, Dell initiated criminal proceedings against Rodriguez in Spain, 4 but the Spanish court ruled that there was insufficient evidence to sustain the criminal charge under Spanish law. Dell twice appealed that adverse decision in the Spanish courts without success. Next, Dell brought a civil suit against Rodriguez in Spain to recover the losses that Dell sustained as a result of Rodriguez's allegedly improper exercise of the stock options. In December 2001, though, Dell voluntarily dismissed this Spanish civil suit; on March 13, 2002, Dell filed the instant action.