Packard Bell Settles Suit Alleging Use of Recycled Parts

Packard Bell NEC has agreed to pay $3.5 million to the federal government to settle a “whistle-blower” lawsuit that accused the electronics firm of using recycled parts in personal computers that were sold as new.

The lawsuit, filed under seal and not disclosed until Wednesday, involved the sale of computers to military base exchanges and other government agencies.

Packard Bell, based in Sacramento, denied any wrongdoing or liability as a result of the settlement. A spokesman said the company no longer uses recycled parts in new computers.

A former manager at a Packard Bell refurbishing plant in Camarillo, Abraham Gale, filed the action in 1995 after he was dismissed from his job.

Gale, who is suing the company in state court for alleged wrongful termination, was let go after about 10 weeks on the job because he complained about Packard Bell’s intermingling of used and new components, according to his lawyer.

Assistant U.S. Atty. Susan R. Hershman said Packard Bell had a general practice of disassembling computers returned by retail customers, refurbishing the parts and then placing them in the general inventory of new parts.

The practice of mixing used and new parts began in 1989 and ended in 1995 when Packard Bell settled several class-action lawsuits filed by consumers.

In one case, Packard Bell reached an agreement with attorneys general from 22 states, promising to put used-parts disclosures on the outside of boxes containing computers.

The company also reached an out-of-court settlement with rival Compaq Computer Corp., which charged in a lawsuit that Packard Bell was misleading the public by selling new PCs with used parts.

Gale’s lawsuit, which the government joined, was the last one remaining.

The $3.5-million settlement compensates the government for more than double the estimated damages incurred by the agencies that purchased the computers.

However, Hershman said she knew of no evidence that any of the computers containing recycled parts were found to be defective.

Under the federal False Claims Act, Gale is entitled to receive from zero to 25% of the settlement, but Hershman said the percentage he will get has not yet been determined.

More than half of Packard Bell NEC, the No. 5 PC seller in the world, is owned by Japan’s NEC Corp.