“In an unusually harsh rebuke of a blue-chip firm, the Securities and Exchange Commission accused Xerox Corp. of having “misled and betrayed investors” with a wide-ranging scheme over four years to manipulate its earnings and enrich top executives,” writes James Bandler in today’s Wall Street Journal.

“The SEC made its accusation in a 39-page complaint filed in U.S. District Court in New York. In the complaint, the SEC said senior Xerox officials used a raft of improper accounting techniques to accelerate the recognition of more than $3 billion in equipment revenue from 1997 through 2000 — far more than the company had previously acknowledged.”

“The complaint marks the culmination of the SEC’s nearly two-year-old investigation of the copier company. Last week, Xerox announced it had agreed to pay a record $10 million civil penalty and restate its earnings covering four years to settle the SEC charges detailed in the complaint, which was filed as part of the settlement agreement. Xerox neither admitted nor denied the charges.”

“The improper moves, which the SEC said Xerox insiders even referred to as ‘accounting tricks,’ boosted pretax profit by $1.5 billion from 1997 through 2000, the complaint said. In 1998, 29% of Xerox’s pretax earnings resulted from undisclosed accounting actions, according to the agency.”

“SEC officials blasted a Xerox culture in which accounting manipulation was an accepted tool at the very highest levels. ‘Senior management had no compunctions about engaging in inappropriate conduct,’ said Paul Berger, associate director of enforcement at the SEC.”

“In a statement, Anne M. Mulcahy, Xerox’s chief executive, said the company has new managers and has put the SEC investigation behind it. Xerox said the terms of the settlement kept the company from responding directly to the complaint.”

“While Xerox has repeatedly said it cooperated fully with the SEC, federal regulators said they chose to levy a hefty fine because of the company’s resistance. ‘We hope it sends a signal [to other companies] that the appropriate thing to do is to be the good corporate citizen and cooperate fully with law-enforcement authorities,’ Mr. Berger said.”