Xerox 2006 Annual Report Download - page 97

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
(“Agius”) and Georgia Stanley (“Stanley”) filed
applications to be considered lead plaintiff. On
November 13, 2006, IBEW, Roten, Agius and Stanley
filed a motion for appointment as additional lead
plaintiffs. Defendants filed their response on
November 28, 2006. On February 2, 2007, the Court
granted the motion of IBEW, Roten, Agius and Stanley
and appointed them as additional lead plaintiffs. 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.: A consolidated
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 purport to
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 third consolidated 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 are also 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 fraudulent 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 condition 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 plaintiffs 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 a motion
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.: 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 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
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