Five ACS Board Members Resign After Feud with Chairman

ACS board members and Chairman Darwin Deason trade barbs in public letters obtained by the Wall Street Journal.

Affiliated Computer Services, caught in a bitter battle between members of the company's board and its chairman, said in a statement Nov. 1 that five board members had resigned after initially refusing to do so.

Darwin Deason, chairman and founder of outsourcing provider ACS, asked for the five board members' resignations verbally the evening of Nov. 30, board members said, and he asked again on Nov. 1 in a letter obtained by the Wall Street Journal. Deason claimed in the letter that company shareholders no longer trusted the five-member board of independent directors.

In March of 2007, Deason and Cerberus Capital Management, a private equity firm, made a bid to purchase ACS, based in Dallas, for $8.2 billion. The board created a special committee to evaluate Cerberus' offer, but ultimately rejected the bid as too low. Unisys, another potential buyer, according to sources briefed on the matter, was derided by Deason as not being a serious bidder. Deason, who had signed an exclusivity contract with Cerberus stating that he could not remain as CEO if ACS was acquired by a rival bidder, claimed in his letter that the board had deliberately failed to produce any competing bidders even after rejecting the Cerberus offer.

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Board members, in a letter to Deason announcing their resignation, responded by saying that Deason had inappropriately ignored other bidders, and that his only interest was "in a transaction in which [he] would participate on the buy side," which stalled the bidding process to the detriment of ACS shareholders. The board further claimed in the letter that Deason's request that they resign was nothing but a "carefully choreographed power play," and that Deason engaged in "bullying and thuggery" in his dealings with the board.

In his letter to the board, Deason included a list of potential replacement members, including Frank Varasano, former executive vice president of Oracle. The potential replacements will be voted on at ACS' next shareholder meeting in May 2008, Deason said.

Now that the five independent board members have resigned and two potential buyers are gone, it's unclear how ACS will proceed, sources say. Sources claim that Computer Sciences Corporation, a consulting, systems integration and outsourcing solution provider, has expressed an interest in the company.

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