STAMFORD, Conn., Feb. 1, 2001  -- Xerox Corporation (NYSE: XRX) today announced the conclusion and findings of an independent investigation of its Mexican subsidiary. The investigation commissioned by Xerox and conducted by external legal and accounting firms determined that the improprieties were caused by the convergence of several disparate factors including the dominating management styles of certain Xerox Mexico executives, the desire of those managers to drive growth at any cost, and implementation of questionable business decisions and practices. The investigation also concluded that upon learning of the problem, and ascertaining and verifying the extent of the issue, the company's response and plan of corrective action was timely and proper. "Several managers of Xerox Mexico circumvented well-established corporate accounting and ethics policies and practices, and engaged in collusion," said Barry Romeril, chief financial officer of Xerox Corporation. "Their actions were deplorable. These managers were promptly removed from their positions as soon as we learned of the problem. We subsequently terminated them after confirming the nature and extent of their involvement. However, their actions resulted in a broken trust with our customers and a troubling sense of dishonor shouldered by all of our conscientious Xerox Mexico employees who abide by Xerox ethics policies and practices." Xerox management uncovered the issues and informed the Board of Directors, and the Audit Committee immediately commissioned the independent investigation last June. The committee engaged the law firm of Akin, Gump, Strauss, Hauer & Feld, which enlisted the assistance of the independent accounting firm of PricewaterhouseCoopers, to perform the investigation to determine whether current or former employees of Xerox Mexico or Xerox Corporation had engaged in any practices that violated either Xerox policies or accepted accounting and record-keeping standards. The investigation revealed irregularities including: ineffective collection actions and inappropriate re-aging of past-due accounts; billing inaccuracies; insufficient bad- debt reserves; improper transaction classification pertaining to the sale, lease or rental of equipment; failure to adhere to Xerox's well-developed and extensive corporate policies and procedures; and inadequate internal controls including appropriate segregation of duties. The report made recommendations to enhance controls and processes, many of which were already under way. These are all being implemented with the oversight of the Audit Committee of the Board. A week after Xerox publicly disclosed the accounting issues in Xerox Mexico last June, the Securities and Exchange Commission initiated a non-public investigation. Xerox has been fully cooperating with the SEC and, once completed, shared the results of its independent investigation with the SEC staff. Separately, Xerox launched a worldwide review of its internal audit controls to ensure that the issues identified in Mexico were not present elsewhere. This review was recently completed. The issues identified in Mexico were not found in any other major unit operated by Xerox. As a result of the review, Xerox has increased receivables reserves in certain smaller Latin American countries. Xerox in 2000 took a $120 million after-tax provision in association with the accounting issues in Mexico.