US: 4 From KPMG Settle With SEC In Xerox Case

Four current and former KPMG auditors have settled a lawsuit by the Securities and Exchange Commission that accused them of helping Stamford-based Xerox Corp. overstate revenue by $3 billion.

Ronald Safran and Michael Conway, KPMG partners who directly oversaw Xerox audits from 1997 to 2000, agreed to pay $150,000 each, the highest civil penalties ever assessed by the SEC, according to James Kidney, the agency's lead lawyer in the case.

Safran will be suspended from practice before the SEC for three years, and Conway will be suspended for two years.

"The accounting profession should know that the SEC is prepared to take these cases to the mat, when appropriate," Kidney said.

The Xerox case yielded some of the highest individual fines levied by the SEC. Before Wednesday's announcement, the previous record was the $100,000 that former KPMG partner Joseph Boyle agreed to pay in October to resolve his role in the Xerox audit.

Before that, the biggest fine was $85,000, imposed on accountant Thomas Hauke of New York, who was accused of preparing a fraudulent audit, Kidney said.

In the latest settlement, former KPMG partner Anthony Dolanski will pay $100,000 and agreed to a one-year suspension for his role in the Xerox audit.

A fourth partner, Thomas Yoho, was censured for unprofessional conduct and faces no other penalty, Kidney said.

None of the four men admitted wrongdoing.

KPMG was fined $22 million last year, topped only by the $50 million that Deloitte & Touche LLP agreed to pay for allegedly failing to detect fraud at Adelphia Communications Corp.

The SEC sued the four men and New York-based KPMG, the fourth-biggest U.S. accounting firm, in Manhattan federal court in 2003, alleging that they helped Xerox manipulate its accounting practices to fill a $3 billion gap between the company's actual operating results and the figures it reported to the investing public.

KPMG did not admit wrongdoing when it agreed to the $22 million fine last April.

"That 2005 civil settlement represented a final resolution for the firm of all SEC-related matters involving the audits of the Xerox financial statements," KPMG spokesman George Ledwith said.

All individuals at KPMG who were involved in the Xerox matter have reached agreements with the SEC, he said.

Xerox, the largest U.S. copier maker, restated revenue for 1997 through 2001 and paid a $10 million fine in 2002. The company neither admitted nor denied the SEC's claims. Xerox replaced KPMG as its auditor with PriceWaterhouseCoopers LLP.