Xerox 2002 Annual Report Download - page 80

attempted to disclose to senior management and to
remedy alleged accounting fraud and reporting irregu-
larities. The plaintiff further claims that the Company
and the individual defendants violated the Company’s
policies/commitments to refrain from retaliating
against employees who report ethics issues. The plain-
tiff also asserts claims of defamation and tortious inter-
ference with a contract. He seeks: (i) unspecified
compensatory damages in excess of $15 thousand, (ii)
punitive damages, and (iii) the cost of bringing the
action and other relief as deemed appropriate by the
court. The parties are engaged in discovery. The indi-
viduals and we deny any wrongdoing and intend to
vigorously defend the action. Based on the stage of the
litigation, it is not possible to estimate the amount of
loss or range of possible loss that might result from an
adverse judgment or a settlement of this matter.
Berger, et al. v. RIGP: A class was certified in an action
originally filed in the United States District Court for the
Southern District of Illinois on July 25, 2000 against the
Company’s Retirement Income Guarantee Plan
(“RIGP”). The RIGP represents the primary U.S. pen-
sion plan for salaried employees. Plaintiffs bring this
action on behalf of themselves and an alleged class of
over 25,000 persons who received lump sum distribu-
tions from RIGP after January 1, 1990. Plaintiffs assert
violations of the ERISA, claiming that the lump sum
distributions were improperly calculated. On July 3,
2001, the court granted the Plaintiffs’ motion for sum-
mary judgment, finding the lump sum calculations
violated ERISA. Although the damages sought were
not specified in the complaint, the Plaintiffs submitted
papers in December 2001 claiming $284 in damages.
On September 30, 2002, the court entered a final judg-
ment on damages, stating it would adopt plaintiffs’
methodology for calculating such damages. RIGP
denies any wrongdoing and has appealed the District
Court’s rulings with respect to both liability and dam-
ages. We believe, based on advice of legal counsel, that
it is probable that on appeal that the judgment will be
overturned. We cannot estimate the amount of loss
that might result from this matter. If the appeal should
ultimately not prevail, we would have to accrue the full
amount of the expense associated with the judgment
as if the judgment were directly against the Company.
Any final judgment after appeal would be paid from
RIGP assets. However, such payment may require the
Company to make additional contributions to RIGP in
the future based on a potential shortfall in plan assets
available to pay other plan liabilities.
Florida State Board of Administration, et al. v. Xerox
Corporation, et al.: A securities law action brought by
four institutional investors, namely the Florida State
Board of Administration, the Teachers’ Retirement
System of Louisiana, Franklin Mutual Advisers and
PPM America, Inc., is pending in the United States
District Court for the District of Connecticut against
the Company, Paul Allaire, G. Richard Thoman, Barry
Romeril, Anne Mulcahy, Philip Fishbach, Gregory
Tayler and KPMG. The plaintiffs bring this action
individually on their own behalves. In an amended
complaint filed on October 3, 2002, one or more of the
plaintiffs allege that each of the Company, the individ-
ual defendants and KPMG violated Sections 10(b) and
18 of the 1934 Act, SEC Rule 10b-5 thereunder, the
Florida Securities Investors Protection Act, Fl. Stat. ss.
517.301, and the Louisiana Securities Act, R.S.
51:712(A). The plaintiffs further claim that the individual
defendants are each liable as “controlling persons” of
the Company pursuant to Section 20 of the 1934 Act
and that each of the defendants is liable for common
law fraud and negligent misrepresentation. The com-
plaint generally alleges that the defendants participated
in a scheme and course of conduct that deceived the
investing public by disseminating materially false and
misleading statements and/or concealing material
adverse facts relating to the Company’s financial condi-
tion and accounting and reporting practices. The plain-
tiffs contend that in relying on false and misleading
statements allegedly made by the defendants, at vari-
ous times from 1997 through 2000 they bought shares
of the Company’s common stock at artificially inflated
prices. As a result, they allegedly suffered aggregated
cash losses in excess of $200. The plaintiffs further
contend that the alleged fraudulent scheme prompted
a SEC investigation that led to the April 11, 2002 settle-
ment which, among other things, required the
Company to pay a $10 penalty and restate its financials
for the years 1997 – 2000 including restatement of
financials previously corrected in an earlier restatement
which plaintiffs contend was false and misleading. The
plaintiffs seek, among other things, unspecified com-
pensatory damages against the Company, the individ-
ual defendants and KPMG, jointly and severally,
including prejudgment interest thereon, together with
the costs and disbursements of the action, including
their actual attorneys’ and experts’ fees. On December
2, 2002, the Company and the individual defendants
filed a motion to dismiss all claims in the complaint
that are in common with the claims in the Carlson
action. That motion is currently pending. The individual
defendants and we deny any wrongdoing alleged in
the complaint and intend to vigorously defend the
action. Based on the stage of the litigation, it is not
possible to estimate the amount of loss or range of
possible loss that might result from an adverse judg-
ment or a settlement of this matter.
In Re Xerox Corp. ERISA Litigation: On July 1, 2002, a
class action complaint captioned Patti v. Xerox Corp. et
al. was filed in the United States District Court for the
District of Connecticut (Hartford) alleging violations of
the ERISA. Three additional class actions (Hopkins,
Uebele and Saba) were subsequently filed in the same
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