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New twist to Xerox scandal

New Delhi July 21. The Xerox ModiCorp Ltd. (XML) made sizeable payments to "fictitious" companies in cash and through bank drafts, of which a percentage was deducted and the rest paid back to the company, the accounting firm, PriceWaterhouseCoopers (PWC), has said.

The PWC, which conducted a detailed investigation into the functioning of XML — Indian arm of PWC — after being alerted about the possibility of XML's books of accounts not being in order, has submitted its report to the Department of Company Affairs (DCA).

According to the report, fictitious companies were paid certain charges ``apparently styled as commissions, discounts and handling charges'' in cash and bank drafts. ``Five per cent of each such payment was deducted by these fictitious companies and the balance returned to Xerox ModiCorp,'' it said adding that the deduction in each such transaction had not been accounted for in XML's books of accounts.

When contacted, the Xerox Corporation's spokesperson in London, Paul Arrowsmith, said ``I have yet to study the report and cannot make any comments.'' The ModiCorp chief, B. K. Modi, also declined comment on the XML bribery issue.

Sources said that as much as Rs. 3.6 crores might have been paid in bribes by the XML at a time when the B. K. Modi group held majority stake in the copier company.

In another development, the Income Tax department claimed to have recovered nearly Rs. 1.10 crores in unaccounted cash, besides unaccounted investment in shares and fixed deposits worth nearly Rs. 1 crore, during the raids on XML earlier this week. The department also found that tax had been evaded to the tune of Rs. 25 crores — Rs. 5 crores for each year — by the company.

In a report submitted to the Securities and Exchange Commission (SEC) of the U.S., the Xerox Corporation had admitted earlier this month that its Indian subsidiary, Xerox Modicorp, made ``improper payments'' to secure Government contracts. The DCA, meanwhile, has served a notice to the XML to submit its accounts by July 23 and accused it of not cooperating in the investigation.

PTI

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