Focus of Xerox probe shifts to stock sales.(Chicago Tribune)

Securities and Exchange Commission Chairman Harvey Pitt's declaration that he's "not finished" with the Xerox Corp. accounting case shifts the spotlight to a string of executives and directors who sold tens of millions of dollars worth of stock as the company was overstating profits and revenue in the late `90s.

The Stamford, Conn.-based office products giant on Friday restated earnings going back to 1997, shifting $6.4 billion in revenue. By recognizing lease revenue over a longer period, Xerox lowered sales and profits for 1997-99, but posted improved results for 2001.

The disclosure stunned investors, who thought Xerox had put its accounting troubles behind it. In April, Xerox _ without admitting or denying the allegations _ agreed to pay a record $10 million penalty after the SEC said it overstated revenue by more than $3 billion and pretax profits by roughly $1.5 billion from 1997-2000.

SEC Chairman Harvey Pitt acknowledged Sunday that the actual restatement involved significantly larger amounts than what was disclosed in the settlement, saying "those who are responsible will pay."

"We're not finished with the Xerox case," he said on ABC's "This Week." "There have been a lot of individuals, offices and directors, accountants, everyone who may have been involved, is still under investigation. And before much longer, we're going to make all of them responsible for what they've done."

Who that might be is not yet known, but the SEC complaint and a series of shareholder lawsuits allege that senior Xerox management used the accounting maneuvers to mislead investors and meet Wall Street earnings estimates. All the while, the SEC alleged, they were selling stock at prices inflated by the "improper" accounting and reaping more than $5 million in performance-based compensation.

Xerox shares jumped from just over $26 at the end of 1996 to an all-time high of $63.94 in May 1999, before collapsing to under $4 in late 2000; on Monday, they closed at $6.85.