A class action lawsuit has been lodged in the US against Xerox for allegedly publishing misleading information about its financial status.


According to a handful of plaintiffs, the misinformation led them to buy Xerox shares that subsequently declined in value by 16%.


This fall in share value occurred after Xerox revealed to the investing public that its earnings for the second quarter 2000 would be below analysts estimates.


The profits warning was the groups fifth since summer 1999. Share price fell by 3.02 to 13.72, nearly its lowest value in a year (PrintWeek, 23 June).


The plaintiffs have alleged that Xerox claimed it was successfully addressing operational problems and that it was experiencing strong growth in its Mexican operations for the fourth quarter of 1999.


However, the plaintiffs claimed that this information failed to properly account for other liabilities and was inaccurate. This, in turn, had artificially inflated Xeroxs stock value at the time of purchase.


The complaint also claimed that, based on its audit of the company, KPMG said that the financial information was correct.


As a result, KPMG is one of the defendants of the pending case, along with Xerox, its chief executive Paul Allaire, chief operating officer Ann Mulcahy, former chief operating officer Rick Thoman and auditor LLP.


"Xerox vehemently denies any wrong-doing and will vigorously contest its defence in court," said a Xerox spokesman.


The law firm handling the case, Bernstein Liebhard & Lifshitz in New York, refused to make any further comment.


Story by Jeremy Allen