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Xerox Fraud Case
Transcript of Xerox Fraud Case
Office equipment and supplies XEROX COMPANY Xerox was founded in 1906 in Rochester
Officially became Xerox in 1961
Invented the Xerox 914 frist plan photocopier XEROX COMPANY Current headquarters in Norwalk, Connecticut
Encountered controversy on April 11,2002
in 2002 that over the five years prior to 2002 it had improperly classified over $6 billion in revenue, leading to an overstatement of earnings by nearly $2 billion. The Securities and Exchange Commission
The Securities and Exchange Commission (SEC) began an investigation that ended in April of that year. The SEC had charged the producer of copiers and related services with accounting manipulations. Xerox Company The amount involved was about half that which is now stated, or about $3 billion. A settlement was eventually reached that included a $10 million fine, as well as an agreement to conduct a further audit. It was this audit that produced the $6 billion figure. XEROX COMPANY There were TWO basic manipulations that formed the basis for the SEC investigation. 1) Cookie Jar method
2) The second method was the acceleration of revenue from short-term equipment rentals, which were improperly classified as long-term leases. XEROX COMPANY In 1998 Xerox reported a pretax income of $579 million, while it should have reported a loss of $13 million. On the other hand, the $137 million loss for 2001 will become a $365 million gain after the manipulation is reversed. The $1.9 billion total that will now be subtracted from revenue reported from 1997-2001 will be added to future reports. XEROX COMPANY The Senior Executives’ Consequences The Securities and Exchange Commission charged the 6 of them with securities fraud and aiding and abetting Xerox’s violations of the reporting books and records and internal control provisions of the federal securities law.
The 6 defendants agreed to pay over $22 million in penalties, disgorgement and interest without admitting or denying the SEC’s allegations. XEROX COMPANY The Senior Executives’ Consequences Two of the executives agreed to be suspended from appearing or practicing before the SEC as accountants.
The CFO of Xerox, Barry Romeril, was suspended permanently and the rest were allowed to apply for reinstatement after three years. THANK YOU FRAUD CASE