Xerox 2007 Annual Report Download - page 127

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
Xerox submitted an affidavit, sworn to on August 16,
2006, specifying the precise amount of fees and sanctions
requested by Xerox. On September 11, 2006, National
Union submitted an opposition to Xerox’s specific request
for fees and sanctions and requested a hearing before the
Court. The Court has not scheduled a hearing on the fees
issues, nor has it issued a decision.
Warren, et al. v. Xerox Corporation: On March 11,
2004, the United States District Court for the Eastern
District of New York entered an order certifying a
nationwide class of all black salespersons employed by
Xerox from February 1, 1997 to the present under Title
VII of the Civil Rights Act of 1964, as amended, and the
Civil Rights Act of 1871. The suit was commenced on
May 9, 2001 by six black sales representatives. The
plaintiffs allege that Xerox has engaged in a pattern or
practice of race discrimination against them and other
black sales representatives by assigning them to less
desirable sales territories, denying them promotional
opportunities, and paying them less than their white
counterparts. Although the complaint does not specify the
amount of damages sought, plaintiffs do seek, on behalf
of themselves and the classes they seek to represent, front
and back pay, compensatory and punitive damages, and
attorneys’ fees. We deny any wrongdoing. Fact discovery
has concluded and expert reports have been exchanged.
Following three days of mediation with a private
mediator, a tentative settlement agreement was reached,
the terms of which are not material to Xerox. On
March 16, 2007, the parties submitted the settlement
agreement to the Court for preliminary approval. At a
status conference held on June 6, 2007, the judge
indicated that he would not approve the current version of
the settlement agreement. He was concerned that the
named plaintiffs may be receiving a disproportionate
amount of damages as compared to the other class
members. He has directed the parties to revise this aspect
of the agreement and bring it back to him. If preliminary
approval is obtained, the agreement will then be subject
to a fairness hearing at which any objections to the
agreement shall be heard. If the Court still finds the
agreement to be acceptable, it will give its final approval
and administration of the settlement shall commence.
Other Matters:
It is our policy to promptly and carefully investigate,
often with the assistance of outside advisers, allegations
of impropriety that may come to our attention. If the
allegations are substantiated, appropriate prompt
remedial action is taken. When and where appropriate, we
report such matters to the U.S. Department of Justice and
to the SEC, and/or make public disclosure.
India: In recent years we became aware of a
number of matters at our Indian subsidiary, Xerox India
Ltd. (formerly Xerox Modicorp Ltd.), that occurred over a
period of several years, much of which occurred before
we obtained majority ownership of these operations in
mid 1999. These matters include misappropriations of
funds and payments to other companies that may have
been inaccurately recorded on the subsidiary’s books
and certain improper payments in connection with sales
to government customers. These transactions were not
material to the Company’s financial statements. We
reported these transactions to the Indian authorities,
the U.S. Department of Justice and to the SEC. The
private Indian investigator engaged by the Indian
Ministry of Company Affairs has completed an
investigation of these matters. In February 2005, the
Indian Ministry of Company Affairs provided our Indian
subsidiary with the investigator’s report which addresses
the previously disclosed misappropriation of funds and
improper payments and requested comments. The
report included allegations that Xerox India Ltd.’s senior
officials and the Company were aware of such activities.
The report also asserted the need for further
investigation into potential criminal acts related to the
improper activities addressed by the report. The matter
is now pending in the Indian Ministry of Company
Affairs. The Company reported these developments and
made a copy of the report received by Xerox India Ltd.
available to the U.S. Department of Justice and the SEC.
On November 17, 2005, Xerox filed its reply with the
DCA (now called the “Ministry of Company Affairs” or
“MCA”). Xerox sent copies of the Xerox Reply to the SEC
and DOJ in the United States. In our reply, we argue that
the alleged violations of Indian Company Law by means
of alleged improper payments and alleged defaults/
failures of the Xerox India Ltd. board of directors were
generally unsubstantiated and without any basis in law.
Further, we stated that the Report’s findings of other
alleged violations were unsubstantiated and unproven.
The MCA will consider our Reply and will let us know their
conclusions. There is the possibility of fines or criminal
penalties if conclusive proof of wrongdoing is found. We
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