Xerox 2003 Annual Report Download - page 78

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Following the oral argument, RIGP and its counsel
reassessed the probability of a favorable outcome
related to the litigation which resulted in the Company
recording a charge equal to the amount of the initial
judgment of $284 plus applicable interest, or $300 in
the first quarter of 2003. As sponsor of the Plan, we
were required to record the charge related to our obli-
gation as, under relevant accounting standards, the
results of the reassessment required recognition of the
judgment. On August 1, 2003, the Seventh Circuit
Court of Appeals affirmed the lower court’s judgment
in all material respects. On November 25, 2003, the
parties signed an agreement to settle the case for
$239, subject to court approval. The court gave its pre-
liminary approval to the settlement on December 5,
2003 and on January 22, 2004, after conducting a fair-
ness hearing, approved the settlement. As a result of
the settlement, the previously recorded charge was
reduced by $61 in the fourth quarter of 2003. The set-
tlement includes provisions that allow as yet unidenti-
fied claimants to submit damage claims for a period of
approximately three years. The Company (as plan
sponsor) has accrued an estimate of such additional
claims, which is included as part of the $239 settle-
ment. Although the total amount ultimately paid
under the final settlement amount could change, the
Company does not believe that any change would be
material to its results of operations or financial condi-
tion in any period. The settlement will be paid from
RIGP assets and would likely require the Company to
make additional contributions to the Plan. The timing
of any additional contributions under ERISA funding
rules would not be required any earlier than 2005.
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 indi-
vidually on their own behalves. In an amended com-
plaint 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 individ-
ual defendants are each liable as “controlling per-
sons” 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 complaint generally alleges that the defendants
participated in a scheme and course of conduct that
deceived the investing public by disseminating materi-
ally false and misleading statements and/or conceal-
ing material adverse facts relating to the Company’s
financial condition and accounting and reporting prac-
tices. The plaintiffs contend that in relying on false and
misleading statements allegedly made by the defen-
dants, at various times from 1997 through 2000 they
bought shares of the Company’s common stock at arti-
ficially inflated prices. As a result, they allegedly suf-
fered 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 settlement 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 compensatory damages against
the Company, the individual 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 has been
fully briefed, but has not been argued before the court.
The individual defendants and we deny any wrongdo-
ing and are vigorously defending 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.
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 viola-
tions of the ERISA. Three additional class actions
(Hopkins, Uebele and Saba) were subsequently filed in
the same court making substantially similar claims. On
October 16, 2002, the four actions were consolidated
as In Re Xerox Corporation ERISA Litigation. On
November 15, 2002, a consolidated amended com-
plaint was filed. A fifth class action (Wright) was filed
in the District of Columbia. It has been transferred to
Connecticut and consolidated with the other actions.
The purported class includes all persons who invested
or maintained investments in the Xerox Stock Fund in
the Xerox 401(k) Plans (either salaried or union) during
the proposed class period, May 12, 1997 through
November 15, 2002, and allegedly exceeds 50,000 per-
sons. The defendants include Xerox Corporation and
the following individuals or groups of individuals dur-
ing the proposed class period: the Plan Administrator,
the Board of Directors, the Fiduciary Investment
Review Committee, the Joint Administrative Board,