Xerox 2007 Annual Report Download - page 123

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
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. On July 18, 2007, the Court entered
an order denying plaintiffs’ motion for class certification,
without prejudice to renewal after the Court holds a
pre-filing conference to identify factual disputes the Court
will be required to resolve in ruling on the motion.
Plaintiffs have filed notices of withdrawal of proposed
class representatives Sol Sachs, Leonard Nelson and
Fernan Cepero. The Court has approved plaintiffs’ notice
of withdrawal of proposed class representative Fernan
Cepero. The parties are engaged in discovery. The
individual defendants and we deny any wrongdoing and
are vigorously defending the action. In the course of
litigation, we periodically engage in discussions with
plaintiffs’ counsel for possible resolution of the matter.
Should developments cause a change in our
determination as to an unfavorable outcome, or result in a
final adverse judgment or be settled for significant
amounts, there could be a material adverse effect on our
results of operations, cash flows and financial position in
the period in which such change in determination,
judgment or settlement occurs. Based on the present
stage of the litigation, it is not possible to estimate the
amount of loss or range of possible loss that might result
from 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 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. 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. 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. On September 28, 2007, the Court entered an
order proposed by the parties to resolve motions to
dismiss, pursuant to which plaintiffs voluntarily dismissed
certain claims, the Xerox defendants withdrew as moot
their partial motion to dismiss the amended complaint
and KPMG withdrew without prejudice its motion to
dismiss the amended complaint. Defendants served their
answer with respect to claims unique to this case on
November 9, 2007. The parties are engaged in discovery.
The individual defendants and we deny any wrongdoing
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