Xerox Corp. has been under federal criminal investigation since June for accounting practices that already have forced the company to restate $6.4 billion in revenue for the past five years and pay a $10 million fine to settle civil securities-fraud charges, the company says.
Sources familiar with the probe by the U.S. attorney’s office in Bridgeport, Conn., said the investigation is still in preliminary stages. For example, the FBI recently interviewed a former assistant treasurer at Xerox, James Bingham, but intends to continue discussions with him, the sources said.
Bingham says he was fired because he tried to stop what he characterizes in court papers as “significant accounting and financial reporting irregularities” at Xerox. A spokesman for Xerox, which has previously described Bingham as a disgruntled employee, said yesterday that the company would not comment on his allegations.
The $10 million fine was the largest ever involving alleged financial reporting fraud; Xerox agreed to pay the fine to settle charges from the Securities and Exchange Commission without admitting or denying guilt.
The SEC said at the time of the settlement that it continues to investigate the role played in the company’s accounting misstatements by several of Xerox’s former top executives and by its former auditor, KPMG LLP.
In April, the SEC said Xerox had been using accounting techniques that did not comply with generally accepted principles to fraudulently accelerate the booking of billions of dollars in revenue from equipment rentals. The company, based in Stamford, Conn., agreed then to stop using such techniques.
The SEC said in its complaint that Xerox engaged in the accounting scheme to meet earnings targets expected by Wall Street investors, and it noted that “compensation of Xerox senior management depended significantly on their ability to meet [those] targets.”
The SEC is considering filing a similar complaint against KPMG, as well as against some former Xerox executives, including former chairman Paul Allaire and former chief financial officer Barry Romeril, who retired at the end of last year.
KPMG has repeatedly said it stands by its work. Yesterday KPMG spokesman George Ledwith said the firm has “no reason to believe we’re the focus” of the investigation by the U.S. attorney’s office.
Spokesmen for the U.S. attorney’s office declined to comment.