Xerox legacy stained by SEC settlement

NEW YORK: Paul Allaire was once known for his vision in steering Xerox Corp. into the digital age before most rival executives saw where the office machine business was heading. But now his name is more likely to be associated with an accounting scandal that led him to agree on to make an $8.6 million payment to the Securities and Exchange Commission and to a five-year ban from American public company boardrooms.

Allaire's legacy at Xerox, the Stamford, Connecticut-based company whose name became synonymous with photocopying, will now include the settlement of charges that he manipulated earnings to boost the company's share price. Five other former executives also paid an aggregate $13.8 million in penalties -- with the total reaching over $22 million -- following the SEC probe into the company's overstating of pre-tax earnings by $1.4 billion from 1997 to 2000.

Allaire was 28 years old when he took a job as a financial analyst at Xerox in 1966. By 1990, he was CEO, a post he held until 1999 and then again from 2000 to 2001. He also served as chairman for most of those years. Known as a low-key and decisive manager who rolled up his sleeves to get a job done, Allaire, 64, has nonetheless been faulted for executing the digital strategy too slowly and for helping plunge the company into financial troubles that led to thousands of layoffs.

"He shook up Xerox in the 1990s and nobody is saying he is a bad manager," said Timothy Ghriskey, president of Ghriskey Capital Partners, a research firm. "The work he did at Xerox helped get Xerox on its feet. In some ways I don't blame these individuals -- shareholders were demanding a lot more from management in the 1990s and some of them went beyond the call of duty to satisfy them." Unfortunately he went too far and has had to pay for that, Ghriskey said.

Shake-up may succeed

Allaire did shake things up some when he ousted his hand-picked successor, Richard Thoman, in 2000, after Thoman's plans alienated the crucial sales force and sent profits south. Allaire took over the helm and initiated a bold plan to remake Xerox as a purveyor of high-end, graphics-friendly equipment and services. That shift may ultimately pay off, as the company reported higher demand in key markets in its latest quarterly results.

But even if Allaire's strategic gambles bear fruit, his legacy will be stained by the fine from the Securities and Exchange Commission and the forced five-year hiatus from being an officer or director of a public company. Some of those directorships, which he gave up immediately, had also proved controversial.

He was the head of the remuneration committee at Europe's biggest drugmaker GlaxoSmithKline Plc, where shareholders last month voted down a pay deal for CEO Jean-Pierre Garnier estimated by some analysts to be worth up to $36 million -- a figure Glaxo disputes. It was the first such successful revolt at a major U.K. blue chip company.

Allaire has for the past seven years been a director of telecommunications equipment group Lucent Technologies Inc., a period in which it has faced its own accounting problems, including a probe by the SEC that was closed without any imposition of penalties. The company had discovered $679 million of improperly booked revenues and had brought the issue to the commission's attention. Allaire was on both its audit and finance committee and its corporate governance and compensation committee.

Still, Allaire has been an active contributor to non-profit organizations, using his clout and connections to support arts and civic groups like the New York City Ballet and the Ford Foundation, where he currently serves as chairman. At the Ballet, Allaire co-chairs the Endowment campaign where he led the fund-raising effort to boost the Ballet's working capital, said a spokesman for the dance group.

© Reuters