Xerox’s ACS group faces SEC accounting investigation

INVESTIGATION CARRIED ON

Xerox said this morning that the U.S. Securities and Exchange Commission is investigating some accounting practices at    one of its units, Affiliated Computer Services.

Xerox Corp., which is concentrating on its services and technology divisions, purchased outsourcing specialist Affiliated Computer Services in February 2010 for roughly $6 billion. It is now part of Xerox’s services business.

ACS has two call centers in the Portland area; it closed two other call centers in Coos County last summer. Xerox also employs more than 1,000 in Wilsonville, where it develops and markets color printers, and manufactures printer ink.

The Norwalk, Conn.-based company said in a regulatory filing that the investigation concentrates on whether revenue associated with certain ACS equipment resale transactions with several customers should have been presented on a net rather than gross basis. The transactions are mostly from periods before Xerox bought the company.

Xerox said neither its or ACS’s net income or cash flow related to these transactions would have been affected by the accounting change.

The company said it is continuing to cooperate with the SEC and that the SEC staff has advised it will not recommend charges against Xerox.

Xerox also said in the filing that Executive Vice President Lynn Blodgett, who also serves as president of Xerox Services, has received a Wells notice from SEC staff in connection with matters surrounding the ACS investigation. Blodgett was appointed to his current position in January 2012. Prior to that, he was president and CEO of Affiliated Computer Services, He led the ACS since November 2006.

Xerox said it understands that two other individuals — one former and one current employee — have also received Wells notices.

A Wells notice is not a formal allegation or a finding of wrongdoing. It is an indication that the staff is considering recommending that the SEC bring civil enforcement actions against those that received notices. Individuals that receive Wells notices have an opportunity to make a submission to try to persuade the SEC that it should not take such action. Xerox said that it has been advised that the three individuals plan to make such submissions.

Xerox’s stock fell 13 cents to $10.27 in late morning trading. The stock has traded between $6.10 and $10.57 in the past 52 weeks and is up about 51 percent since the start of the year.