On January 14, 2009 the judge entered his Order and Final Judgment approving the settlement and dismissing the case. Attorneys were awarded $120 million in fees and reimbursement of expenses in the amount of $3,314,399.90.
According to a press release dated March 28, 2008, Xerox Corp. said it will pay $670 million, and KPMG LLP will pay $80 million, to settle an eight-year-old securities lawsuit filed on behalf of Xerox investors who claimed Xerox committed accounting fraud to meet Wall Street earnings expectations. Xerox said it agreed to settle without admitting to any wrongdoing.
On July 18, 2007, the Court entered an order denying plaintiffs’ motion for class certification, without prejudice to renewal after the Court holds a pre-filing conference to identify factual disputes the Court will be required to resolve in ruling on the motion. The parties are presently engaged in discovery.
According to the Company’s FORM 10-Q for the quarterly period ended June 30, 2006, on July 13, 2005, the court denied the motion to dismiss the third consolidated amended complaint. On October 31, 2005, the defendants answered the complaint. On January 19, 2006, plaintiffs filed a motion for class certification. That motion has not been fully briefed or argued before the court. The parties are engaged in discovery.
As disclosed in the same SEC filing, on September 11, 2002, the court entered an endorsement order granting plaintiffs’ motion to file a third consolidated amended complaint. The defendants’ motion to dismiss the second consolidated amended complaint was denied, as moot. According to the third consolidated amended complaint, plaintiffs purport to bring this case as a class action on behalf of an expanded class consisting of all persons and/or entities who purchased Xerox common stock and/or bonds during the period between February 17, 1998 through June 28, 2002 and who were purportedly damaged thereby (“Class”). The third consolidated amended complaint sets forth two claims: one alleging that each of the Company, KPMG, and the individual defendants violated Section 10(b) of the 1934 Act and SEC Rule 10b-5 thereunder; the other alleging that the individual defendants are also allegedly liable as “controlling persons” of the Company pursuant to Section 20(a) of the 1934 Act. Plaintiffs claim that the defendants participated in a fraudulent scheme that operated as a fraud and deceit on purchasers of the Company’s common stock and bonds by disseminating materially false and misleading statements and/or concealing material adverse facts relating to various of the Company’s accounting and reporting practices and financial condition. The plaintiffs further allege that this scheme deceived the investing public regarding the true state of the Company’s financial condition and caused the plaintiffs and other members of the alleged Class to purchase the Company’s common stock and bonds at artificially inflated prices, and prompted a SEC investigation that led to the April 11, 2002 settlement which, among other things, required the Company to pay a $10 penalty and restate its financials for the years 1997-2000 (including restatement of financials previously corrected in an earlier restatement which plaintiffs contend was improper). The third consolidated amended complaint seeks unspecified compensatory damages in favor of the plaintiffs and the other Class members against all defendants, jointly and severally, including interest thereon, together with reasonable costs and expenses, including counsel fees and expert fees. On December 2, 2002, the Company and the individual defendants filed a motion to dismiss the complaint.
The original complaint charges defendants with violations of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint
alleges that the defendants issued materially false and misleading information
regarding Xerox's financial condition and prospects, particularly that it was
successfully addressing its domestic operational problems and was experiencing
strong growth in its Mexican operations for the fourth quarter of 1999. The
complaint also alleges that this information was misleading because Xerox had
improperly recognized uncollectable receivables as income and failed to
properly account for other liabilities. These misrepresentations were
repeated in the Company's Form 10-K filed with the SEC on March 27, 2000.
Additionally, the complaint alleges that the Form 10-K contained a letter from
KPMG stating that, based on KPMG's audit of the Company, the financial
information in the Form 10-K was accurate.
The complaint further alleges that the dissemination of this materially misleading information and the failure to disclosed material information caused Xerox's common stock to be artificially inflated throughout the Class Period. The truth about Xerox's
financial condition was revealed to the investing public on July 26, 2000,
when Xerox disclosed that its earnings for the second quarter 2000 would be
below analyst's estimates and that it was cooperating with an SEC
investigation of accounting irregularities at its Mexican operations. These
disclosures caused Xerox's stock price to decline 16% from $18.19 per share to
$15.25 per share.