Another Reason FSSA Should Cancel Privatization Agreement

First we learned that ACS, the company which FSSA intends to award a $1 billion contract to manage the agency's welfare programs, is the former employer of the agency's head, Mitch Roob. Then we learned that ACS has less than a stellar record in other states, such as Georgia and Texas where it has been given similar contracts. Now we learn that ACS has sacked its two top executives after an internal investigation determined that they had improperly enriched themselves by manipulating stock options granted to them by the company. The AP's David Koenig writes:

The chief executive and top financial officer at a company Indiana wants to manage its welfare programs resigned after an internal investigation found that they manipulated grant dates for stock options, violating the information-technology company's ethics code.

Affiliated Computer Services Inc. CEO and President Mark A. King and Chief Financial Officer Warren D. Edwards signed separation agreements and relinquished their titles on Sunday . . .

Dallas-based ACS, which provides back-office services to other companies and government agencies, also said in a filing that it might seek to recover profits it believes former CEO Jeffrey Rich received by backdating stock-option grant dates.

ACS also said a lower-level employee, whom it didn't identify, knew of the intentional misdating of documents.

The company said it expects to take a noncash charge of $51 million plus tax expenses for the incorrect accounting of grants dated from 1994 to 2005.

In September, the company delayed the filing of its annual report and said it would review stock option grants going back to 1994. The probe was launched in response to a pending informal investigation by the Securities and Exchange Commission and a grand jury subpoena from the U.S. Attorney for the Southern District of New York.

Under their separation agreements, the exercise price on all options held by King and Edwards will be increased to offset the benefit _ $3.2 million for King and $1 million for Edwards _ that they would have reaped from backdating the options, the company said . . .

The $1 billion privatization agreement is being done for all the wrong reasons. Roob, a disciple of former Mayor Stephen Goldsmith's privatization initiatives for the city of Indianapolis, had his mind made up that these welfare services were going to be privatized long before he accepted his appointment to this role by Gov. Daniels, although we've been assured he has nothing to do with the decision to award the contract to the company everyone seemed to know was going to get the contract from day one. Roob refused to undertake a cost-benefit analysis of the proposal to determine that it in fact would result in either better services or cost-savings to taxpayers before putting them out to bid. It is privatization for the sake of privatization. It is also playing recklessly with the lives of Hoosiers who are dependent on these services for their survival. It's time for someone in a position of responsibility in the Daniels' administration to be a responsible adult and stop this poorly-planned initiative before it's too late.