Xerox 2005 Annual Report Download - page 90

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
82
The plaintiffs further contend that the alleged fraudulent scheme
prompted an 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 prejudg-
ment 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 defen-
dants filed a motion to dismiss all claims in the complaint that
are in common with the claims in the Carlson action. On July 13,
2005, the court denied the motion. On December 9, 2005, the
defendants moved to dismiss claims based on issues uniquely
related to plaintiffs. Plaintiffs filed their opposition to that motion
on January 31, 2006. 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
arevigorously 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 Courtfor the District of Connecticut (Hartford)
alleging violations of the ERISA. Three additional class actions
(Hopkins, Uebele and Saba) were subsequently filed in the same
courtmaking substantially similar claims. On October 16, 2002,
the four actions wereconsolidated as In Re Xerox Corporation
ERISA Litigation. On November 15, 2002, a consolidated amended
complaint 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 persons. The defen-
dants include Xerox Corporation and the following individuals or
groups of individuals during the proposed class period: the Plan
Administrator, the Board of Directors, the Fiduciary Investment
Review Committee, the Joint Administrative Board, the Finance
Committee of the Boardof Directors, and the Treasurer.The
complaint claims that all the foregoing defendants were fiduciaries
of the Plan under ERISA and, as such, wereobligated to protect
the Plan’sassets and act in the interest of Plan participants.
The complaint alleges that the defendants failed to do so and
thereby breached their fiduciary duties. Specifically, plaintiffs
claim that the defendants failed to provide accurate and complete
material information to participants concerning Xerox stock,
including accounting practices which allegedly artificially inflated
the value of the stock, and misled participants regarding the
soundness of the stock and the prudence of investing their retire-
ment assets in Xerox stock. Plaintiffs also claim that defendants
failed to invest Plan assets prudently, to monitor the other
fiduciaries and to disregard Plan directives they knew or should
have known were imprudent, and failed to avoid conflicts of
interest. The complaint does not specify the amount of damages
sought. However, it asks that the losses to the Plan be restored,
which it describes as “millions of dollars.” It also seeks other legal
and equitable relief, as appropriate, to remedy the alleged breaches
of fiduciary duty, as well as interest, costs and attorneys’ fees. We
filed a motion to dismiss the complaint. The plaintiffs subsequently
filed a motion for class certification and a motion to commence
discovery. Defendants have opposed both motions, contending
that both are premature before there is a decision on their motion
to dismiss. In the fall of 2004, the Court requested an updated
briefing on our motion to dismiss and update briefs were filed
in December of that year. We and the other defendants 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.
Digwamaje et al. v.IBM et al: Apurported class action was filed
in the United States District Courtfor the Southern District of
New York on September 27, 2002. Service of the First Amended
Complaint on the Company was deemed effective as of December
6, 2002. On March 19, 2003, Plaintiffs filed a Second Amended
Complaint that eliminated a number of corporate defendants but
was otherwise identical in all material respects to the First Amended
Complaint. The defendants include Xerox and a number of other
corporate defendants who are accused of providing material assis-
tance to the apartheid government in South Africa from 1948
to 1994, by engaging in commerce in South Africa and with the
South African government and by employing forced labor, thereby
violating both international and common law. Specifically, plaintiffs
claim violations of the Alien Tort Claims Act, the Torture Victims
Protection Act and RICO. They also assert human rights violations
and crimes against humanity. Plaintiffs seek compensatory damages
in excess of $200 billion and punitive damages in excess of
$200 billion. The foregoing damages are being sought from all
defendants, jointly and severally. Xerox filed a motion to dismiss
the Second Amended Complaint. Oral argument of the motion
was heard on November 6, 2003. By Memorandum Opinion and
Order filed November 29, 2004, the court granted the motion to
dismiss. A clerk’s judgment of dismissal was filed on November 30,
2004. On December 27, 2004, the Company received a notice
of appeal dated December 24, 2004. On February 16, 2005,
Xerox Annual Report 2005