[PEN-L:27325] a Xerox copy of WorldCom

[Louis Proyect <lnp3@xxxxxxxxx>]

BBC, Friday, 28 June, 2002, 12:13 GMT 13:13 UK 

Accounting panic hits Xerox
 
Xerox has agreed to restate its accounts

In yet another blow for corporate America, shares in the office equipment
giant Xerox have lost almost a third of their value in pre-market trading
after a newspaper suggested the firm massively inflated its profits. 

The company has already indicated that it mis-stated its accounts by just
under $2bn during the past five years. A report in the Wall Street Journal,
however, suggests the accounting black hole could be as large as $6bn. 

The fall-out from this latest accounting scandal is expected to further
deflate financial market confidence, already punctured by the WorldCom
scandal. 

Spooked currency traders sold the dollar, sending it lower to near parity
with the euro, while in the stock markets sharp falls in share prices
across the board are expected when trading starts on Wall Street. 

In May this year, Xerox agreed to pay a $10m (£6.57m) fine after the US
stock market regulator, the Securities and Exchange Commission (SEC), filed
a suit alleging that it had overstated $3bn worth of profits in its
1997-2000 accounts. 

In accepting the fine, Xerox neither admitted nor denied any wrongdoing. 

Worse than expected 

According to the Wall Street Journal, a fresh audit of Xerox's accounts has
found that the total amount of improperly recorded revenue between 1997 and
2001 could be more than $6bn, the newspaper reported. 

"This looks pretty ugly and I can't imagine after the WorldCom stuff that
it's going to help Wall Street much," said one trader. 

"The effect this news will have on investors in the US is important as they
will start to ask [more] questions about corporate reliability," said Tom
Hougaard, market strategist at spread betters City Index. 

The new audit had been conducted by Xerox's new auditor
PricewaterhouseCoopers (PwC) , which took over as Xerox's auditor after it
fired KPMG. 

Second chance 

Both Xerox and PwC declined to comment on the Wall Street Journal article,
though it did repeat its previous promise to restate its accounts for the
1997-2001 period. 

"Xerox expects its revenues to be restated by around $2bn over the five
year period," said spokeswoman Christa Carone. 

Xerox traded at $5.51 via the Instinet electronic brokerage system in early
trading before the day's trading on the New York Stock Exchange. 

On Thursday, Xerox shares closed at $8. 



Louis Proyect
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