Xerox 2004 Annual Report Download - page 74

72
ing to matters that had been under investigation since
2000. As a result, the SEC filed a complaint, which we
simultaneously settled by consenting to the entry of an
Order enjoining us from future violations of Section
17(a) of the Securities Act of 1933, Sections 10(b),
13(a) and 13(b) of the 1934 Act and Rules 10b-5, 12b-
20, 13a-1, 13a-13 and 13b2-1 thereunder, requiring
payment of a civil penalty of $10, and imposing other
ancillary relief. We continue to be subject to the provi-
sions of the Order relating to future violations of law.
Litigation Against the Company:
In re Xerox Corporation Securities Litigation: Acon-
solidated securities law action (consisting of 17 cases)
is pending in the United States District Court for the
District of Connecticut. Defendants are the Company,
Barry Romeril, Paul Allaire and G. Richard Thoman.
The consolidated action purports to be a class action
on behalf of the named plaintiffs and all other
purchasers of common stock of the Company during
the period between October 22, 1998 through October
7, 1999 (“Class Period”). The amended consolidated
complaint in the action alleges that in violation of
Section 10(b) and/or 20(a) of the Securities Exchange
Act of 1934, as amended (“1934 Act”), and SEC Rule
10b-5 thereunder, each of the defendants is liable as
aparticipant in a fraudulent scheme and course of
business that operated as a fraud or deceit on
purchasers of the Company’s common stock during
the Class Period bydisseminating materially false and
misleading statements and/or concealing material
facts relating to the defendants’ alleged failure to dis-
close the material negativeimpact that the April 1998
restructuring had on the Company’s operations and
revenues. The amended complaint further alleges
that the alleged scheme: (i) deceived the investing
public regarding the economic capabilities, sales pro-
ficiencies, growth, operations and the intrinsic value
of the Company’s common stock; (ii) allowed several
corporate insiders, such as the named individual
defendants, to sell shares of privately held common
stock of the Company while in possession of materially
adverse, non-public information; and (iii) caused the
individual plaintiffs and the other members of the
purported class to purchase common stock of the
Company at inflated prices. The amended consolidated
complaint seeks unspecified compensatory damages
in favor of the plaintiffs and the other members of the
purported class against all defendants, jointly and
severally, for all damages sustained as a result of
defendants’ alleged wrongdoing, including interest
thereon, together with reasonable costs and expenses
incurred in the action, including counsel fees and
expert fees. OnSeptember 28, 2001, the court denied
the defendants’ motion for dismissal of the complaint.
On November 5, 2001, the defendants answered the
complaint. On or about January 7, 2003, the plaintiffs
filed a motion for class certification. That motion has
not yet been fully briefed or argued before the court.
On or about November 8, 2004, the International
Brotherhood of Electrical Workers Welfare Fund of
Local Union No. 164 filed a motion to intervene as a
named plaintiff and class representative. That motion
has been fully briefed, but has not been argued before
the court. The court has not issued a ruling. The par-
ties are currently engaged in discovery. The individual
defendants and we deny any wrongdoing 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.
Christine Abarca, et al. v. City of Pomona, et al.
(Pomona Water Cases): In 1999, a series of complaints
was filed against the Company in the Superior Court
of the State of California for the County of Los Angeles
on behalf of individual plaintiffs, claiming damages
as a result of our alleged disposal and/or release of
hazardous substances into the soil and groundwater.
Plaintiffs alleged that hazardous substances from the
Company’soperations entered the municipal drinking
water supplied by the City of Pomona and the Southern
California Water Company, and as a result they were
exposed to the substances byinhalation, ingestion and
dermal contact. Plaintiffs’ claims against the Company
included personal injury, wrongful death, property
damage, negligence, trespass, nuisance, and violation
of the California Unfair Trade Practices Act. In
November 2004, the parties entered into a confidential
settlement agreement, the terms of which were not
material to the Company.
Carlson v. Xerox Corporation, et al.: Aconsolidated
securities law action (consisting of 21 cases) is pending
in the United States District Court for the District of
Connecticut against the Company, KPMG and Paul A.
Allaire, G. Richard Thoman, Anne M. Mulcahy, Barry
D. Romeril, Gregory Tayler and Philip Fishbach. On
September 11, 2002, the court entered an endorsement
order granting plaintiffs’ motion to file a third consoli-
dated amended complaint. The defendants’ motion to
dismiss the second consolidated amended complaint
was denied, as moot. According to the third consoli-
dated amended complaint, plaintiffs purport to bring
this case as a class action on behalf of an expanded
class consisting of all persons and/or entities who pur-
chased Xerox common stock and/or bonds during the
period between February 17, 1998 through June 28,
2002 and who were purportedly damaged thereby
(“Class”). The third consolidated amended complaint
sets forth twoclaims: one alleging that each of the