The Hindu : Xerox Corporation blames Modis

Online edition of India's National Newspaper
Friday, Jul 05, 2002

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National

Xerox Corporation blames Modis

By Sushma Ramachandran

NEW DELHI JULY 4. Even as the new Finance Minister, Jaswant Singh, declared that a full probe would be carried out into the Xerox-Modicorp bribery scandal, the Xerox Corporation today squarely placed the responsibility for financial management of Xerox-Modicorp during 2000 on its joint venture partner, B.K. Modi and Associates. Modicorp, on its part, maintained a studied silence though it is clear that the coming board meeting of the joint venture company scheduled for July 12 is bound to be stormy.

The London-based Xerox spokesman, Paul Arrowsmith, told The Hindu that the "overall financial control'' of the company was with the joint venture partner during 2000. He said the "improper payments'' made by Xerox-Modicorp executives to Indian officials were discovered in October 2000. "These were immediately stopped and we then engaged PricewaterhouseCoopers to do special audit of the company''.

The PwC audit covered a wider area than just these payments. After it was concluded, the company sought legal counsel after which the findings were made public and the Indian authorities were informed. "We welcome the Indian Government's investigations and will cooperate fully with them'', Mr. Arrowsmith said.

On whether the decision was based on the suggestion of legal counsel, he said: "it was a decision we took ourselves and voluntarily disclosed the information to the Indian Government''.

On whether the financial control still remained with the Indian partner, he said, "I can only say we are still a joint venture''.

Mr. Arrowsmith, Xerox communications manager for West Asia, India, Eurasia, Africa and Russia, was here earlier this week to inform Government authorities about the scam carried out by the Indian subsidiary. On whether any dialogue was going on with the Government, he said, "we are cooperating with them''.

Modicorp sources also clarified that B.K. Modi was currently in New York while Xerox-Modicorp's managing director, Pierre Nothard, was in the United Kingdom.

The scandal about the bribes or what are described as "improper payments'' broke when the U.S.-based Xerox filed a delayed annual report on June 28 at the behest of the U.S. market regulator, the Securities Exchange Commission. In the case of India, the report said improper payments had been made over a period of years. In 2000, when the activity was stopped, the amount was estimated at about $ 600,000 to 700,000.

Xerox has had a 68 per cent equity stake in Xerox-Modicorp since 1999, making it the majority shareholder.

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