Xerox 2005 Annual Report Download - page 89

Xerox Corporation
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Separately, on June 8, 2005, IBEW and Robert W. Roten moved to
substitute as lead plaintiffs and proposed class representatives.
That motion has been fully briefed, but has not been argued
before the court. The court has not issued a ruling. The parties
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.
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 consolidated amended complaint.
The defendants’ motion to dismiss the second consolidated
amended complaint was denied, as moot. According to the third
consolidated amended complaint, plaintiffs purportto bring this
case as a class action on behalf of an expanded class consisting
of all persons and/or entities who purchased 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 thirdconsolidated amended complaint sets
forth two claims: one alleging that each of the Company,KPMG,
and the individual defendants violated Section 10(b) of the 1934
Act and SEC Rule 10b-5 thereunder; the other alleging that the
individual defendants arealso allegedly liable as “controlling
persons” of the Company pursuant to Section 20(a) of the 1934
Act. Plaintiffs claim that the defendants participated in a fraudu-
lent scheme that operated as a fraud and deceit on purchasers
of the Company’s common stock and bonds by disseminating
materially false and misleading statements and/or concealing
material adverse facts relating to various of the Company’s
accounting and reporting practices and financial condition. The
plaintiffs further allege that this scheme deceived the investing
public regarding the true state of the Company’s financial condi-
tion and caused the plaintiffs and other members of the alleged
Class to purchase the Company’s common stock and bonds at
artificially inflated prices, and 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 improper). The third consolidated amended complaint
seeks unspecified compensatory damages in favor of the plain-
tiffs and the other Class members against all defendants, jointly
and severally, including interest thereon, together with reasonable
costs and expenses, including counsel fees and expert fees. On
December 2, 2002, the Company and the individual defendants
filed a motion to dismiss the complaint. On July 13, 2005, the
court denied the motion. On October 31, 2005, the defendants
answered the complaint. On January 19, 2006, plaintiffs filed
amotion for class certification. That motion has not been fully
briefed or argued before the court. The parties are 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.
Florida State Board of Administration, et al. v. Xerox Corporation,
et al.: Asecurities 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. RichardThoman, Barry Romeril, Anne Mulcahy,Philip Fishbach,
Gregory Tayler and KPMG. The plaintiffs bring this action individ-
ually on their own behalves. In an amended complaint filed on
October 3, 2002, one or moreof the plaintiffs allege that each of
the Company, the individual 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 complaint
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 condition and accounting and reporting practices.
The plaintiffs contend that in relying on false and misleading
statements allegedly made by the defendants, at various 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.
Xerox Annual Report 2005