Xerox, KPMG Settle Shareholder Suit

Xerox Corp. said it will pay $670 million to settle a shareholder lawsuit over alleged accounting misdeeds, while its former auditor, KPMG LLP, will pay $80 million.

The Xerox payment is the largest it has made to deal with allegations that it inflated earnings by manipulating its accounting in years past. In addition to the $670 million, the office-equipment maker said it will place $125 million in reserve for potential liability in three other pending lawsuits related to similar allegations. The settlement and reserve will result in a $491 million after-tax charge in the first quarter.

The Norwalk, Conn., company ...