Xerox 2007 Annual Report Download - page 124

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
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.
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 Court for the District
of Connecticut (Hartford) alleging violations of the ERISA.
Three additional class actions (Hopkins, Uebele and Saba)
were subsequently filed in the same court making
substantially similar claims. On October 16, 2002, the four
actions were consolidated 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 defendants 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 Board of Directors, and the Treasurer.
The complaint claimed that the defendants breached
their fiduciary duties under ERISA to protect the Plan’s
assets and act in the interest of Plan participants.
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
retirement assets in Xerox stock. Defendants filed a
motion to dismiss the complaint for failure to state claim.
On April 17, 2007, the Court ruled on the motion to
dismiss, granting it in part and denying it in part, and
giving the plaintiffs an opportunity to replead. The
plaintiffs subsequently filed a Second Consolidated
Amended Complaint, alleging that some or all defendants
breached their ERISA fiduciary duties during 1997-2002
by (1) maintaining the Xerox Stock Fund as an investment
option under the Plan; (2) failing to monitor the conduct
of Plan fiduciaries; and (3) misleading Plan participants
about Xerox stock as an investment option under the
Plans. The complaint does not specify the amount of
damages sought. However, it asks that the losses to the
Plans 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. On
July 18, 2007, Defendants answered the new complaint
and also filed a partial motion to dismiss. On August 9,
2007, the plaintiffs filed their motion for class
certification and on August 31, 2007 filed their opposition
to defendants’ partial motion to dismiss. Discovery is
ongoing. The Company and the other defendants deny
any wrongdoing and will continue to vigorously defend
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. At this
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.
Digwamaje et al. v. IBM et al.: A purported class
action was filed in the United States District Court for 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 the Company and a number of other corporate
defendants who are accused of providing material
assistance to the apartheid government in South Africa
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