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ArticleXeroxCFOMagazine

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You are here: Home : Topics A-Z : Today in Finance : Article Xerox Settles SEC Charges Company agrees to pay $10 million for financial fraud; SEC says accounting function was "just another source of revenue." Elsewhere: IBM's books fine, and are companies too generous with benefits? Stephen Taub , CFO.com April 12, 2002 Xerox has agreed to pay a $10 million fine as part of a settlement with the Securities and Exchange Commission. The commission charged that the copier company schemed to defraud investors during a four-year period by using what it called "accounting actions" and "accounting opportunities" to meet or exceed Wall Street expectations and disguise its true operating performance. The SEC, which sued Xerox on Thursday in federal court, stated that most of these actions violated generally accepted accounting principles (GAAP), thus accelerating the company's recognition of equipment revenue by more than $3 billion and increasing its pretax earnings by approximately $1.5 billion. The SEC's civil lawsuit was filed under a settlement agreement last week with the company. Xerox also agreed to restate its results from 1997 to 2000, and consented to the entry of an injunction for violations of the antifraud and other provisions of the federal securities laws. "Xerox used its accounting to burnish and distort operating results rather than to describe them accurately," said Stephen Cutler, the SEC's director of enforcement. "For Xerox, the accounting function was just another revenue source and profit opportunity. As a result, investors were misled and betrayed." Xerox's senior management orchestrated a four-year scheme to disguise the company's true operating performance, according to Paul Berger, the SEC's associate director of enforcement. "Such conduct calls for stiff sanctions, including, in this case, the imposition of the largest fine ever obtained by the SEC against a public company in a financial fraud case," noted Berger. "The penalty also reflects, in part, a sanction for the
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