SEC Complaint Alleges Fraud at Xerox

Xerox Corp.’s top executives led a four-year scheme to inflate revenue by $3 billion to meet Wall Street’s growth targets, the Securities and Exchange Commission said Thursday in approving a record $10-million fine against the company.

The size of the penalty, the largest against a public company for financial fraud, reflects the magnitude of Xerox’s deception and its failure to cooperate with the SEC investigation, SEC Associate Enforcement Director Paul R. Berger said. Xerox previously had said it agreed to a preliminary settlement.

The accounting manipulations by Xerox, one of the best-known U.S. companies, had “enormous impact” on the company’s reported financial performance, the SEC said.

The SEC complaint, filed in Manhattan federal court, alleged that Xerox’s senior executives quashed objections to the flawed figures from subordinates and from the company’s auditor, KPMG.

At the same time, the executives were making tens of millions of dollars in bonuses and sales of personal stock at the inflated prices that resulted from the fraud, the suit charged.

The SEC said its inquiry of Xerox’s abuses is continuing. Former Chairman and Chief Executive Paul Allaire and former Chief Financial Officer Barry Romeril are among the executives under investigation, a person knowledgeable about the probe said.

KPMG also said it is still under SEC investigation.

Stamford, Conn.-based Xerox, which neither admitted nor denied wrongdoing, has almost 90 days to restate results for 1997 to 2000.

Its shares fell 24 cents to $9.70 on the New York Stock Exchange.