Pain in the ACS?

Guess it's been a bad news-good news few days for Dallas-based Affiliated Computer Services. At the end of business Friday, the North Carolina Department of Health and Human Services announced it was terminating its $171 million contract with ACS, which was scheduled to provide the state with a new Medicaid claims paying system. That comes after state officials and ACS officials got into it over "costs, staffing levels and delivery schedules in supplying the hardware and software needed to get the new claims system up and running," says a Phoenix-based business journal, which also reports that "outside of large highway projects," North Carolina's deal with the Fortune 500 company was "the largest in state government."

That came a week after InformationWeek reported that ACS was among some 60 companies that have "admitted to problems related to stock option pricing," which involves the so-called backdating of stocks. Whazzat mean? Says reporter J. Nicholas Hoover, it's "where executives and sometimes rank-and-file employees exercise stock options based on an earlier, lower stock price than the day of the grant, resulting in inflated returns." It's illegal, Hoover writes, "if it isn't properly reflected in earnings or taxes," and word is not only is the Securities and Exchange Commission looking into it, but so is the Department of Justice. Exactly what ACS did or didn't do is being looked into; keep in mind, the key word here is "allegation," but according to InformationWeek, the company "will take up to a $32 million charge against fiscal fourth-quarter earnings [and] faces [a] shareholder lawsuit."

On the flip side, ACS was named today by the people who do this black book as the "premier provider of business process outsourcing and information technology solutions," so they got that goin' for 'em, which is nice. --Robert Wilonsky

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