Most often, it’s the board of directors that pushes the company’s CEO out the door.
But the shoe was on the other foot last week when lawyers for Dallas-based Affiliated Computer Services Inc. asked the five non-management members of its board to resign.
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The board members at first balked, and then stepped down.
But later in the week, they fought back, suing ACS for saying that they had breached their fiduciary duties.
The Texas shootout has brought a boardroom disagreement into the open, offering a peek at what happens when a handpicked and allegedly chummy board turns on the person who appointed it in the first place.
According to the lawsuit and to documents filed with the suit, as well as stories in the Wall Street Journal and other media outlets, the problems began when Darwin Deason, the founder and chairman of ACS, decided earlier this year to buy the company for $6.2 billion and take it private.
Cerberus Capital Management LP, which is headed by former Treasury Secretary John Snow, joined with Deason in the effort until last week when it pulled its offer.
In a letter to the five directors dated Oct. 1, a lawyer for ACS states that the directors didn’t “engage in good faith negotiations” over the Deason/Cerberus proposal, thereby losing valuable time.
It also accuses them of disclosing information to a competitor. And it alleges that the directors have enriched themselves through “unauthorized cast payments.”
In their own letter back to ACS and in their lawsuit, which was filed Nov. 1, the directors deny they have breached their duties or feathered their own nests.
They also insist that they had a duty to look at other offers for the company, but that the terms of the Deason/Cereberus proposal made it impossible to do this.
The squabble has become another chapter in the flamboyant rags-to-riches saga of Darwin Deason, 67, a man who, according to a D Magazine profile, left Rogers, Ark., at age 18, and set out for Tulsa and fame and fortune with $50 in his pocket.
He eventually started an ATM network and then become president and CEO of MTech, a bank-data processor.
He left MTech after it was bought out and soon started ACS, growing that outsourcing firm into a Fortune 500 company that now has 58,000 employees.
Along the way, Deason also acquired a reputation of living well (yachts, planes, etc.) and for a mercurial temperament.
The company has also been the subject of an ongoing federal investigation into manipulating stock options.
Frank A. Rossi, the chairman of FAR Holdings Co., a private investment firm and a former managing partner of Arthur Andersen and Joseph P. O’Neill, president and CEO of Public Strategies Washington Inc., had been on the ACS board since 1994 before they resigned.
The other three former board members are, J. Livingston Kosberg, a director of U.S. Physical Therapy Inc., Dennis McCuistion, President of McCuistion & Associates and host of the McCuistion Program on PBS, and Robert B. Holland III, former U.S. representative on the World Bank board of directors. Holland came on to the board this January.
In a 2006 story on company directors and stock options that won a Pulitzer Prize, the Wall Street Journal reported some earlier connections between the board members and ACS.
Deason and Kosberg were caught up in the collapse of a Texas savings and loan that Kosberg chaired. Kosberg was also on the board of a company that ACS spun off, a company that eventually went bankrupt.
ACS had also invested a small amount of money in a company McCuistion had started to produce a television show.
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