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Xerox Case Isn't Over, SEC Chairman Says

July 01, 2002|VICKY STAMAS | BLOOMBERG NEWS

WASHINGTON -- Xerox Corp. still is under investigation for inflating its revenue, and the Securities and Exchange Commission will hold company officials responsible for any wrongdoing, Chairman Harvey Pitt said.

The world's biggest copier maker, in a delayed annual report filed Friday, restated equipment sales from 1997 to 2001 by $6.4 billion, more than twice as much as the company acknowledged in April.

"Everyone who may have been involved--individuals, officers, directors and accountants--is still under investigation," Pitt told ABC's "This Week." "And before much longer, we're going to make all of them responsible for what they've done."

By shifting the timing and makeup of sales, Xerox was able to meet earnings forecasts. Xerox was fined a record $10 million by the SEC in April because of the false reporting of about $3 billion in sales.

The Xerox restatement may lead to new penalties, Pitt said. "We're not finished with the Xerox case."

Regulators have stepped up scrutiny of corporate accounting since Enron Corp. filed for bankruptcy protection in December after overstating income by about $1 billion over four years. The SEC on Wednesday charged WorldCom Inc., the No. 2 U.S. long-distance company, with committing fraud by hiding $3.9 billion in costs.

Concerning Xerox's accounting woes, most of the sales came from transactions in Latin America that should have been reported as rental revenue, the company said in a statement.

Former Xerox Chairman Paul Allaire and former Chief Financial Officer Barry Romeril may be among the executives under investigation, analysts said. Xerox's auditor, KPMG, also has been under investigation, its chief executive, Eugene O'Kelly, has said.

Pitt said the change from the $3-billion shortfall disclosed in April and the $6.4-billion restatement was "a big difference."

"We told this company, 'Not only must you disclose and restate what we know, we want to know everything,' " Pitt said. "That's what they've now done. And now those who are responsible will pay."

Pitt turned aside a question by ABC's Sam Donaldson about whether he will resign. "I took an oath of office and I'm proud of what we're achieving, and there's more to come," Pitt said.

The SEC is working with Sen. Paul Sarbanes (D-Md.), chairman of the Senate Banking Committee, in trying to strengthen supervision of financial reporting, Pitt said.

"I'm for whatever Congress does in the end," Pitt said. "The problem with writing things in stone, however, is that legislation is very difficult to undo."

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