Photocopy giant Xerox faces further investigation for overstating its profits, this time from the FBI and the US attorney-general in Connecticut, it emerged today.
If the company thought it had moved beyond scandal after having settled its case with the financial watchdog, the securities and exchange commission (SEC), it was mistaken. In April, Xerox paid a $10m (Â£6.4m) fine and restated its financial results dating back to 1997.
Although Xerox neither admitted nor denied any wrongdoing, the restatement showed it had misreported $6.4bn of equipment revenue, and overstated its pretax income by 36%, or $1.4bn, over the five years to 2001.
Accounting scandals at Xerox and other leading US companies such as Enron and WorldCom, now both bankrupt have helped undermine investor confidence in Wall Street and corporate America, prompting Federal Reserve chairman Alan Greenspan to blame “infectious greed” for boardroom malfeasance.
As far as Xerox is concerned, despite the SEC settlement, initial inquiries from the FBI and the Connecticut state attorney-general threaten to keep Xerox embroiled in scandal for a while longer.
Moreover, although the company has settled its case with the SEC, the securities watchdog has informed additional individuals, including the current Xerox treasurer, Greg Tayler, that they could face civil charges.
The SEC has come down hard on Xerox, saying it is “going after all the corporate officers” involved in the alleged fraud, despite the April settlement. The agency may go so far as forcing former Xerox officials to return compensation they received as the wrongful accounting boosted company earnings and Xerox’s share price.
According to the SEC, Xerox’s former chief financial officer, Barry Romeril, told senior Xerox management in November 1999 that when accounting actions were stripped away, Xerox essentially saw “no growth” through the late 1990s. Yet In 1998, for instance, the company reported a revenue gain of 7% from the previous year.
Xerox’s accounting was done by KPMG, which said it did nothing wrong and was, in fact, fired for forcing Xerox to conduct an independent accounting examination that resulted a restatement of results.