Xerox Settles Fraud Charge By SEC; Will Restate Earnings

Xerox

As part of the consent decree between the two, Xerox admitted no wrongdoing, agreed to restate its earnings from 1997 through 2000 and "adjust" its results for 2001.

The SEC said in a statement that the complaint, which it filed in U.S. District Court along with the consent decree, charges that Xerox used a variety of accounting actions that had the effect of inflating the company's pretax profits.

"By 1998, nearly $3 of every $10 of Xerox's annual reported pretax earnings resulted from undisclosed accounting actions," the SEC said. "Without these accounting actions, the complaint alleges, Xerox would have fallen short of market earnings expectations in virtually every reporting period from 1997 through 1999."

The regulatory agency said Xerox used seven different accounting techniques that often had the effect of recognizing revenue in one quarter at the expense of future quarters.

"According to the complaint, Xerox fraudulently disguised these actions so that investors remained unaware that the company was meeting earnings expectations only by using accounting maneuvers that could compromise future results," the SEC said.

In a separate statement, Xerox Chairman and CEO Anne Mulcahy said the deal with the SEC effectively closes the book on a probe that had been dogging the company for more than a year.

"Xerox today is a stronger company with a new management team that has taken all the right steps to turn our business around," Mulcahy said in the statement. "With the SEC matters now behind us, we are better positioned to continue fortifying our business through operational improvements and future growth opportunities--creating enhanced value for our customers and shareholders."