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[May 18, 2006]

ACS faces fourth lawsuit, subpoena

(Dallas Morning News, The (KRT) Via Thomson Dialog NewsEdge) May 18--Affiliated Computer Services Inc. will defend its stock option grant practices on two additional legal fronts, the company said Thursday.

Dallas-based ACS, already facing three shareholder derivative lawsuits, received a grand jury subpoena from the U.S. District Court for the Southern District of New York requesting documents related to stock option grants, the company disclosed in a Securities and Exchange Commission filing.


And a fourth shareholder derivative suit has been filed in U.S. District Court in Delaware. The suit alleges that ACS broke federal rules designed to limit short-term profits by company insiders.

ACS said it plans to cooperate with the Justice Department on the subpoena. The Delaware suit's claims have no merit and the company will defend itself in the matter, it said.

The company's stock option grants have been under scrutiny since the SEC began an inquiry in March. The agency routinely declines to comment on pending investigations.

The SEC is reportedly examining whether executives received stock option grants that were backdated to days when ACS' stock price dipped, allowing recipients to buy stock at a lower price. ACS has denied the charge.

The company has disclosed that in some cases, it issued stock option grants with effective dates that preceded the dates that all members of its board's compensation committee had approved the grants. While it plans to adjust its accounting to correct that discrepancy, the company does not believe the practice violated Delaware corporate law or its own stock option plan, it has said.

Two of the other shareholder derivative suits were filed in State District Court in Dallas. The remaining suit was filed in Delaware Chancery Court. Those three suits allege breaches of fiduciary duties and ill-gotten gains from stock option grants.

Separately, ACS announced a small acquisition Thursday. The company has agreed to buy Intellinex LLC, a human resources outsourcing firm, from Ernst & Young LLP for $75 million. Intellinex, based in Cleveland with an office in Irving, has had about $80 million in sales in the last 12 months, ACS said.

E-mail charrison@dallasnews.com

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