November 3, 2016
The first case, a class action lawsuit taken up by shareholders, concerns “possible breaches of fiduciary duty by officers and directors”, with former Securities and Exchange Commission attorney Willie Briscoe and law firm Powers Taylor leading the class action. The period of time in which the firm and lawyer are stating that the “possible breaches” took place are between 23 April 2012 and 23 October 2015.
The class action’s allegations outline that Xerox and its officers and directors “are alleged to have violated certain provisions of the Securities Exchange Act of 1934”, and that they “issued materially false and misleading statements touting its new software product, Health Enterprise, as an important growth area for Xerox”. Xerox had reportedly claimed it would “operate at a low cost and high profit margin”, but on three separate points it “failed to disclose information”.
The first of these was that the existing Health Enterprise projects “were experiencing major delays and cost overruns”, while the second was that Xerox “would be unable to deliver Health Enterprise implementations at sustainable profits”, with the third claiming that “as a result of the above, Xerox’s statements about its business, operations and prospects lacked a reasonable basis”.
When the OEM released its third quarter results in October 2015, the suit alleges, these were “disappointing due to costs associated with the implementation of Health Enterprise and the termination of Health Enterprise contracts with two state agencies”, and the OEM’s stock “dropped significantly immediately”. The firms are “investigating additional legal claims”, and said that “affected” shareholders can contact them to join the class action at “no cost or free to you”.
The second case, from an investor perspective, has seen the law firm Howard G. Smith begin an investigation “concerning the company and its officers’ possible violations of federal securities laws”, citing again the poor quarterly results and “lost revenues” from Health Enterprise, as well as the “termination of certain Health Enterprise projects in California and Montana”. According to the OEM, losing these contracts “would result in lower revenues in each of the next three quarters”.
The firm added that the OEM “announced plans for a strategic review of the company’s business portfolio”, and said that if an investor had “purchased Xerox securities” or “would like to learn more about these claims”, they can contact the firm. Earlier this month, the OEM’s largest shareholder, who attempted to block the split, agreed a settlement in a court case. Darwin Deason had sued Xerox because of the spin-off of its document outsourcing business, as he felt that his shares would lose value after the split.
Xerox settled with Deason by giving him 180,000 shares of Xerox “preferred stock” and 120,000 preferred shares of Conduent stock. Deason is the company’s largest individual investor, owns 6.1 percent of Xerox stock, is the fourth largest investor overall, and founded Affiliated Computer Services, acquired by Xerox in 2010 for $6.4 billion (€5.7 billion) and part of Conduent.
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