Whose Default Is It, Anyway?

Almost two weeks ago, Dallas-based Affiliated Computer Services, Inc. got the contract with the city of Dallas to provide some red-light cameras; the deal's worth $13.29 million bucks over five years. On the same day the announcement was made, ACS also announced it would not be able to file on...

By Robert Wilonsky

September 27, 2006

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Almost two weeks ago, Dallas-based Affiliated Computer Services, Inc. got the contract with the city of Dallas to provide some red-light cameras; the deal's worth $13.29 million bucks over five years. On the same day the announcement was made, ACS also announced it would not be able to file on time its annual financial report with the Securities and Exchange Commission because of the SEC and Department of Justice's separate investigations into how ACS top execs were given backdated stock options worth millions, which we've covered extensively here.

Well, comes word today that ACS has filed suit in United States District Court, Northern District of Texas, Dallas Division--for reasons that seem kind of, well, extraordinary. In filings made with the SEC today, ACS says it has "received a letter from persons claiming to hold certain of its senior notes advising the Company that it was purportedly in default" of its loan agreements with the Bank of New York Trust Company. ACS wants the bank to say that the people allegedly holding these letters ain't holding jack squat, which is why it's filed suit against the bank. Got that?

Odd thing is, as we reported two weeks ago, the company even said that if it didn't turn in its paperwork to the SEC by the end of September, which is rapidly approaching by the looks of my calendar, it would be violating its credit deals with its lendors. ACS was seeking a waiver, and we don't know if it's been granted yet. Developing, as the kids say. --Robert Wilonsky

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