ACS Has Won Key Deals Amid SEC Investigation Cloud - InformationWeek

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Software // Enterprise Applications

ACS Has Won Key Deals Amid SEC Investigation Cloud

It's facing investigation of its stock options pricing for executives.

When the feds start sniffing around a public company's financials, customers take notice. So when Affiliated Computer Services released details about a Securities and Exchange Commission investigation last week, amid other ongoing legal troubles at the No. 4 U.S. IT outsourcing company, it no doubt sent up some flares.

ACS offered new details of the probe, which it disclosed in March, into irregularities in its executive stock option plan, the latest legal hubbub for the company. ACS will take a $40 million charge against earnings as a result of the probe and delay filing its fourth-quarter earnings report.

The SEC is questioning the timing of stock options for undisclosed senior executives because the price for many options was pegged to dates just before a significant run-up in the company's stock price, suggesting they had been improperly backdated. A shareholder lawsuit contains similar allegations and names as defendants former CEO Jeffrey Rich, current CEO Mark King, and ACS founder and chairman Darwin Deason. Rich, who left ACS last year, is due to receive a one-time payout of $4.1 million, and he'll remain on ACS's payroll at an $820,000 annual salary through June.

In February, prosecutors in Alberta charged ACS with bribing police officers to help win a contract to provide the Canadian province with photo radar traffic-enforcement systems.

The question now is whether the problems will affect ACS's business. It has recently revealed major contracts, including a three-year, $5 million deal to support soft drink bottler PepsiAmericas; a multimillion-dollar IT outsourcing agreement with Burger King; and a four-year, $100 million deal with Mississippi's Medicaid plan.

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