Former Xerox chiefs may be charged
In the latest accounting scandal in corporate America, the Securities and Exchange Commission (SEC) has informed two former Xerox executives and an official at the company's former accountancy firm KPMG that it may file civil charges against them.
The move comes just a week after Xerox restated its earnings from 1997 to 2000, involving a possible reallocation of more than $2 billion (€2.27 billion) of recorded revenue. Xerox shares slipped in early trading yesterday, falling 38 cents to $9.90.
The SEC reportedly considers the accounting issue at Xerox to be one of the most serious in recent years. Its action comes hard on the heels of the debacle at Enron, the Houston energy trader which went bankrupt after it falsely stated earnings.
Former Xerox chairman Mr Paul Allaire and former chief financial officer Mr Barry Romeril and several other Xerox officials have received notices from the SEC giving them an opportunity to make a case against being charged, according to the Wall Street Journal.
A similar notice was reportedly issued to Mr Michael Conway, the KPMG partner who co-headed the Xerox audit. KPMG, Xerox's long-time auditor, was fired by the company six months ago.
A KPMG spokesman confirmed that KPMG has been talking with the SEC "about the possibility of a proceeding against the firm" related to Xerox, but vigorously denies any collusion with the copier-maker.
Xerox, which employs 1,600 people in Dundalk and 1,000 in Dublin, agreed last week to pay a $10 million civil penalty for financial reporting violations, while not admitting or denying fraud. This is the largest penalty paid by any US company in an accounting case.
The SEC and Xerox have been locked in dispute for two years since the regulatory agency began investigating irregular accounting practices at the company's Mexican unit.
A year ago, Xerox was thrown into crisis when KPMG challenged the company's 2000 annual report, a move the copier firm said could push it into bankruptcy.
The SEC is investigating whether Xerox used complex manoeuvres to accelerate the booking of revenue from office equipment that it leased in long-term deals, according to the Wall Street Journal. This helped Xerox to continue posting good results in the late 1990s, when its copier business was slumping.
On Tuesday, Mr David Duncan, the Arthur Andersen accountant in charge of the Enron account, pleaded guilty to ordering the shredding of Enron documents two days after an SEC investigation began, and agreed to co-operate with federal prosecutors.