Former Auditors for Xerox Are Fined
The Securities and Exchange Commission levied record fines against current and former auditors from KPMG accused of helping Xerox Corp. overstate revenue by $3 billion, the agency said Wednesday.
The two men who directly oversaw Xerox audits from 1997 to 2000, Ronald Safran and Michael Conway, agreed to pay $150,000 each to settle a lawsuit brought by the SEC, according to the agency’s lead lawyer in the case, James Kidney.
“The accounting profession should know that the SEC is prepared to take these cases to the mat when appropriate,” he said.
The Xerox case yielded some of the highest individual fines ever imposed by the SEC. The previous record was the $100,000 that former KPMG partner Joseph Boyle agreed to pay in October to resolve his role in the Xerox audit. Prior to that, the biggest fine was $85,000 against an accountant accused of preparing a fraudulent audit, Kidney said.
Safran will be suspended from auditing public companies for three years, and Conway will be suspended for two years.
Former KPMG partner Anthony Dolanski will pay $100,000 and agreed to a one-year suspension stemming from his work on the Xerox audit. A fourth partner, Thomas Yoho, was censured for unprofessional conduct and faces no other penalty, Kidney said. None of the four men admitted any wrongdoing.
KPMG was fined $22 million last year, topped only by the $50 million Deloitte & Touche agreed to pay for allegedly failing to detect fraud at Adelphia Communications Corp.
The SEC sued the four men and New York-based KPMG in Manhattan federal court in 2003, alleging they helped Xerox manipulate its accounting practices to fill a $3-billion gap between the company’s actual operating results and the figures it reported to the investing public.
As early as 1997, Xerox executives began manipulating the accounting for equipment leases, ultimately inflating pretax profit by $1.2 billion over a four-year period, the SEC said. KPMG didn’t admit wrongdoing when it agreed to the $22-million fine last April.
