Uno R3 + Motor Shield R3 + Wall AC/DC power block + USB cable = zapped desktop

I just connected my Arduino to my desktop PC via the USB connector and instantly my PC mouse and keyboard stopped working (LEDs turned off, no key control) as well as my display went blank.

Had to power down the PC, then power back on, and very luckily the USB devices were functioning again.

Why is this the case?

I had: Arduino Uno R3, with the Arduino Motor Shield R3 plugged in, Wall AC-to-DC power block connected to the Arduino's power socket, and was plugging in the USB from the Arduino board to the PC when this happened. I had no other devices plugged into the Arduino or the shield, certainly no motors plugged in.

The wall AC-DC power block is rated: Input = 100-240V AC 50-60Hz 0.5A Output = 12V DC 1.5A

When using power block + Arduino + Motor shield, then the Blink program runs so the board is getting power and seems fine.

I read that the Uno is supposed to auto-switch between USB / DC input. As it stands, I cant use the Arduino to communicate with the desktop if I have the DC supply plugged in as well.

Do I have a broken Arduino?