It is not just an employment law dispute requiring an Employment Relations Authority hearing; Fuji Xerox can continue with High Court action against three former executives in a multi-million dollar claim alleging overpayment of bonuses and commissions totalling $3.6 million and loss of business totalling $86.3 million after business customers abandoned Xerox service contracts when learning of accounting irregularities.
Former managing director Neil Whittaker, former chief financial officer Mark Donald Allright and former general sales manager Gavin Pollard are alleged to have manipulated reporting of Xerox transactions to artificially boost revenue reported for the periods 2012-2015, with knock-on benefits for their bonuses and commissions.
Photocopier sales by Xerox are commonly structured as lease transactions. Accounting rules differentiate between finance leases and operating leases. Xerox alleges the three former executives mis-categorised thousands of transactions, to their personal benefit.
Xerox demands repayment of $3.6 million allegedly overpaid for commissions and bonuses.
Xerox also claims Mr Whittaker and Mr Allright inappropriately structured a five million dollar receipt as being an inducement to surrender an existing office lease on Auckland’s College Hill when it was an inducement to lease new premises in Newmarket. Different accounting treatments for lease surrenders as against inducements to rent lead to differing consequences for reported profits.
Separately, former chief financial officer for Xerox New Zealand Mr Allright is being sued by Xerox Singapore for deceit. It is claimed intercompany advances of some $174.5 million would not have been made but for the alleged accounting deceit.
Attempts by all three to have the High Court case thrown out as an employment issue, where Employment Relations Authority has sole jurisdiction, did not succeed. Xerox claim for restitution was a case properly for the High Court, Justice Jagose ruled. Restitution does not seek to recover money paid under an employment contract; it seeks recovery of money allegedly paid in excess of the contract. Companies Act claims for alleged breach of directors’ duties are also to continue in the High Court.
Xerox is also suing auditors Ernst & Young.
Fuji Xerox New Zealand Ltd v. Whittaker, Allright & Pollard – High Court (21.06.21)
21.103