Xerox Settles SEC Case

The Securities and Exchange Commission said Thursday that it had fined Xerox (XRX Quote) $10 million.

The penalty, which Xerox said last week it had cobbled together with the SEC's enforcement divsion pending approval by the full commission, is the largest penalty ever imposed against a public company in a financial fraud case. The company emphasized once again that it neither admitted to nor denied the government's allegations in reaching the settlement.

As a result of the agreement, Xerox will restate results for four years. The company also agreed to appoint a committee of outside directors to review its accounting controls and policy.

"Xerox used its accounting to burnish and distort operating results rather than to describe them accurately," SEC Director of Enforcement Stephen Cutler said in a press release. "For Xerox, the accounting function was just another revenue source and profit opportunity. As a result, investors were misled and betrayed."

According to the SEC's complaint, from "at least" 1997 to 2000 Xerox defrauded investors by boosting earnings and revenue through undisclosed accounting actions. The company recorded $3 billion in revenue and $1.5 billion in pretax earnings prematurely, the SEC said.

The SEC said it continues to investigate Xerox's accounting "as it relates to other parties." According to recent reports the SEC has widened its probe to include former Xerox Chairman Paul Allaire, former Chief Financial Officer Barry Romeril, and KPMG, the company's auditor until six months ago.