Xerox 2008 Annual Report Download - page 87

Notes to the Consolidated
Financial Statements
(in millions, except per share data and
unless otherwise indicated)
May 20-21, 2008. The panel’s decision was released on August 28,
2008, in which the panel determined that MPI is precluded from
advancing certain claims to royalties in respect of Xerox’s Version 8
software and its derivatives, but that certain other claims being
advanced by MPI are not precluded. A hearing relating to most of
the issues raised in the current arbitration, other than damages
issues relating to one of MPI’s claims that has been bifurcated, is
expected to take place in October 2009. Should developments
cause a change in our determination as to an unfavorable
outcome, or result in a final adverse judgment or a settlement for a
significant amount, 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 proceeding, it is not
possible to estimate the amount of any material loss or range of
material loss that might result from any of the claims advanced in
such counterclaim.
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
alleged that Xerox had 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 did not specify the amount
of damages sought, plaintiffs sought, on behalf of themselves and
the classes they sought to represent, front and back pay,
compensatory and punitive damages, and attorneys’ fees. A
settlement agreement was reached, the terms of which are not
material to Xerox. On September 22, 2008, an Order and Judgment
of Final Approval of the Settlement was entered. The Company
denies any wrongdoing as part of the settlement. The period for
appeal has expired and the settlement is now final.
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 alleged
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 (“DOJ”) and to the SEC.
In 2005, the private Indian investigator engaged by the Indian
Ministry of Company Affairs completed an investigation of these
matters and issued a report (“Report”). A copy of the Report was
provided to our Indian subsidiary, which was asked by the Indian
Ministry of Company Affairs to comment on the Report. The
Report addresses the previously disclosed misappropriation of
funds and alleged improper payments and includes allegations
that Xerox India Ltd.’s senior officials and the Company were
aware of such activities. The Report also asserts 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 DOJ and the SEC.
On November 17, 2005, Xerox India Ltd. filed its reply with the
Ministry of Company Affairs (or “MCA”). Xerox sent copies of the
reply to the SEC and DOJ in the United States. In its reply, Xerox
India Ltd. argued 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, Xerox India
Ltd. 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 have told the MCA that Xerox’s conduct in voluntarily
disclosing the initial information and readily and willingly
submitting to investigation, coupled with the non-availability of
earlier records, warrants complete closure and early settlement. In
January 2006, we learned that the MCA had issued a “Show Cause
Notice” to certain former executives of Xerox India Ltd. seeking a
response to allegations of potential violations of the Indian
Companies Act. We also learned that Xerox India Ltd. had received
a formal Notice of Enquiry from the Indian Monopolies & Restrictive
Trade Practices Commission (“MRTP Commission”) alleging that
Xerox India Ltd. committed unfair trading practices arising from the
events described in the Report. Xerox India Ltd. filed its reply to the
Notice of Enquiry and the investigating officer subsequently filed
his response to our reply. At a hearing in August 2007, Xerox India
Ltd. argued that the Enquiry is not maintainable under the
Commission’s jurisdiction. The issue of maintainability of the Notice
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