The discovery of a handwritten note has dragged Affiliated Computer Services Inc’s executive chairman Darwin Deason into the stock options investigation that has gripped the company, according to a report in The Wall Street Journal.
Authorities investigating the possible backdating of options at ACS unearthed a personalized Post-it note written by Deason in mid-2002 on which he wrote that the company had always priced stock strike price on options at lowest so far in quarter. Deason also wrote that hundreds of ACS grant recipients expected options to be granted at opportune dates and that to change now would seem strange.
Deason is alleged to have written the note shortly before a new US law came into force making it harder to backdate option grants. He ends the note by saying: we will run business as we always have until a law says different.
Lawyers acting for Deason said the note clearly showed that ACS’s option practices were legal. The statement in his notes that ACS granted options at the lowest price ‘so far’ was thoroughly reviewed by the independent investigators, said Marc Rosenberg from Cravath Swaine and Moore LLP. An ACS spokesperson said Deason’s note was entirely consistent with the company’s previous disclosures to investigators.
The increased level of public scrutiny could not come at a worse time for Deason, who this week teamed with private equity firm Cerberus Capital Management to table a $5.9bn takeover bid for ACS. Already, two of the company’s shareholders have filed lawsuits aimed at blocking the deal, claiming the cash offer of $59.25 per share is too low.
ACS first became embroiled in the stock options inquiry in May 2006, when it received a grand jury subpoena requesting documents relating to the granting of stock options going back to 1998. The company initially insisted that none of its officers or directors had been engaged in the backdating of stock option grants.
However, last November, ACS announced the resignation of CEO Mark King and CFO Warren Edwards. The company said that two men, along with former CEO Jeff Rich, had used hindsight to select favorable grant dates for stock options, in violation of ACS’s code of ethics.
In a statement released at the time, ACS said: Option grants were typically imitated by senior management of the company or Darwin Deason but added that the three executives implicated in backdating options had acted without Deason’s knowledge.