Xerox 2014 Annual Report Download - page 131

and/or 20(a) of the Securities Exchange Act of 1934, as amended (1934 Act), and SEC Rule 10b-5 thereunder,
each of the defendants was liable as a participant in a fraudulent scheme and course of business that operated as a
fraud or deceit on purchasers of the Company’s common stock during the Class Period by disseminating materially
false and misleading statements and/or concealing material facts relating to the defendants’ alleged failure to
disclose the material negative impact that the April 1998 restructuring had on the Company’s operations and
revenues. The complaint further alleged that the alleged scheme: (i) deceived the investing public regarding the
economic capabilities, sales proficiencies, growth, operations and the intrinsic value of the Company’s common
stock; (ii) allowed several corporate insiders, such as the named individual defendants, to sell shares of privately
held common stock of the Company while in possession of materially adverse, non-public information; and
(iii) caused the individual plaintiffs and the other members of the purported class to purchase common stock of the
Company at inflated prices. The complaint sought unspecified compensatory damages in favor of the plaintiffs and
the other members of the purported class against all defendants, jointly and severally, for all damages sustained as
a result of defendants’ alleged wrongdoing, including interest thereon, together with reasonable costs and expenses
incurred in the action, including counsel fees and expert fees. In 2001, the Court denied the defendants’ motion for
dismissal of the complaint. The plaintiffs’ motion for class certification was denied by the Court in 2006, without
prejudice to refiling. In February 2007, the Court granted the motion of the International Brotherhood of Electrical
Workers Welfare Fund of Local Union No. 164, Robert W. Roten, Robert Agius ("Agius") and Georgia Stanley to
appoint them as additional lead plaintiffs. In July 2007, the Court denied plaintiffs’ renewed motion for class
certification, without prejudice to renewal after a pre-filing conference to identify factual disputes the Court would be
required to resolve in ruling on the motion. After that conference and Agius’s withdrawal as lead plaintiff and
proposed class representative, in February 2008 plaintiffs filed a second renewed motion for class certification. In
April 2008, defendants filed their response and motion to disqualify Milberg LLP as a lead counsel. On
September 30, 2008, the Court entered an order certifying the class and denying the appointment of Milberg LLP as
class counsel. Subsequently, on April 9, 2009, the Court denied defendants’ motion to disqualify Milberg LLP. On
November 6, 2008, the defendants filed a motion for summary judgment. On March 29, 2013, the Court granted
defendants' motion for summary judgment in its entirety. On April 26, 2013, plaintiffs filed a notice of appeal to the
United States Court of Appeals for the Second Circuit. On September 8, 2014, the Second Circuit affirmed the
District Court's decision dismissing the action. The deadline for plaintiffs to file a petition for certiorari before the
United States Supreme Court expired on December 8, 2014; no petition was filed. This matter is now closed.
State of Texas v. Xerox Corporation, Xerox State Healthcare, LLC, and ACS State Healthcare, LLC, a Xerox
Corporation: On May 9, 2014, the State of Texas, via the Texas Office of Attorney General (the “State”), filed a
lawsuit in the 53rd Judicial District Court of Travis County, Texas. The lawsuit alleges that Xerox Corporation, Xerox
State Healthcare, LLC, and ACS State Healthcare (collectively “Xerox” or “the Company”) violated the Texas
Medicaid Fraud Prevention Act in the administration of its contract with the Texas Department of Health and Human
Services (“HHSC”). The State alleges that the Company made false representations of material facts regarding the
processes, procedures, implementation, and results regarding the prior authorization of orthodontic claims. The
State seeks recovery of actual damages, two times the amount of any overpayments made as a result of unlawful
acts, civil penalties, pre- and post-judgment interest, and all costs and attorneys’ fees. The State references the
amount in controversy as exceeding hundreds of millions of dollars. Xerox filed its Answer in June, 2014 denying all
allegations. Xerox will continue to vigorously defend itself in this matter. We do not believe it is probable that we will
incur a material loss in excess of the amount accrued for this matter. In the course of litigation, we periodically
engage in discussions with plaintiff’s 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 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.
Guarantees, Indemnifications and Warranty Liabilities
Indemnifications Provided as Part of Contracts and Agreements
We are a party to the following types of agreements pursuant to which we may be obligated to indemnify the other
party with respect to certain matters:
• Contracts that we entered into for the sale or purchase of businesses or real estate assets, under which we
customarily agree to hold the other party harmless against losses arising from a breach of representations and
covenants, including obligations to pay rent. Typically, these relate to such matters as adequate title to assets
sold, intellectual property rights, specified environmental matters and certain income taxes arising prior to the
date of acquisition.
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