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Prosecutors Eye Xerox's Accounting

Federal prosecutors are investigating accounting practices at Xerox Corp. that were previously reviewed by securities regulators in a probe that led to a record $10 million civil penalty against the copy machine maker.

The Stamford-based company issued a statement Monday night announcing the new investigation and saying it would cooperate with the prosecutors.

Xerox settled allegations by the Securities and Exchange Commission in April. The SEC alleged that the company used a variety of what it called "accounting tricks" and "accounting opportunities" to boost earnings by about $1.5 billion, misleading investors about its results.

"Our understanding is that the probe is into the same matters," said Xerox spokeswoman Christa Carone. "We still need to learn of the full context of the investigation."

A spokeswoman for the U.S. attorney's office declined comment.

The SEC said Xerox senior management "orchestrated" a four-year scheme to disguise its operating results, using improper accounting techniques to accelerate the recognition of equipment revenue.

By 1998, the agency said, nearly $3 of every $10 of Stamford, Connecticut-based Xerox's annual reported pretax earnings resulted from undisclosed accounting actions.

Under the settlement, the world's largest copier company agreed to pay the fine, restate its financial statements for 1997 through 2000 and adjust previously announced 2001 results. The company did not admit or deny wrongdoing in the settlement.

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