The U.S. Securities and Exchange Commission has accepted Xerox's proposed settlement of a complaint about accounting irregularities at the Stamford, Conn., company.
The SEC filed suit against Xerox in the U.S. District Court for the Southern District of New York Thursday, alleging a "wide-ranging, four-year scheme to defraud investors," according to an SEC statement.
Xerox consented to the filing without admitting or denying the allegations in the complaint, according to the SEC.
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The filing marks the conclusion of a complex deal in which Xerox agreed to settle the SEC's complaint by restating its financial results from 1997 to 2000 and paying a $10 million penalty.
In addition, Xerox has agreed to appoint a committee composed entirely of outside directors to review its accounting controls and policies, the SEC said. The committee will appoint an independent consultant to carry out the work, Xerox said.
The company first announced details of its proposed settlement last week.
The SEC alleges that Xerox controlled the equipment revenue and profit it reported using a number of accounting actions. In the fourth quarters of 1998 and 1999, these actions were responsible for 37% of the company's reported pretax profit, the SEC said in a statement. Through such actions, Xerox met market expectations, but without them would have fallen short by a wide margin in most of the reporting periods from 1997 through 1999, the SEC said.
Many of the accounting actions related to Xerox's leasing arrangements, the SEC said.
Under the deal agreed with the SEC, Xerox will restate its results for 1997 through 2000, making changes to the timing of its recognition of revenue from leases, the company said in a statement. It will also reallocate lease revenue to equipment, service and finance revenue streams, it said in a statement. It said it cannot estimate what impact these changes will have until the process is complete, but that there will be no impact on the monetary value of the leases, or the cash received or due to be received from them.
The SEC has given Xerox an extension of 75 days - in addition to the 15-day extension it received last week - to file its 2001 10-K and first-quarter 2002 10-Q statements, the company said.
The IDG News Service is a Network World affiliate.
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