Six former Xerox executives settled civil charges that they misled investors about the office-equipment maker’s earnings to impress Wall Street and boost its stock price, the Securities and Exchange Commission said Thursday.
The executives paid a combined $22 million in penalties and restitution without admitting or denying the allegations, the SEC said in a complaint filed in New York federal court. The funds will be put into a court-ordered restitution fund for investors.
The SEC alleges the senior executives including former Chief Executive Paul A. Allaire, former Chief Financial Officer Barry D. Romeril, and former Chief Operating Officer G. Richard Thoman used accounting tricks that violated generally accepted principles to inflate profits from 1997 to 2000.
The complaint said Allaire, Romeril, and Thoman “set the tone at the top” by stressing the importance of Xerox meeting short-term earnings targets.
Romeril directed or allowed lower-ranking defendants in Xerox’s financial department to “close the gap” between the company’s actual results and Wall Street’s target, the SEC charged.
“A public company’s stock price should reflect economic reality, not a distortion of that reality,” said SEC Enforcement Chief Stephen Cutler. “Xerox’s senior management substituted accounting devices for the company’s true operational performance.”
Others named in the suit were former controller Philip Fishbach, former assistant controller Daniel Marchibroda, and former director of accounting policy Gregory Tayler.
Allaire and Romeril, now retired, “decided to put this issue behind them and get on with their lives rather than undertake lengthy and expensive litigation of the issues,” their attorney, Andrew Vollmer, said in a statement.
The settlement is subject to court approval.
In April 2002, Xerox paid $10 million to settle SEC charges over violations of antifraud and financial reporting provisions of the securities laws. The company also agreed to restate its financial results.
KPMG, Xerox’s former auditor also charged in a separate suit, is contesting the allegations.