ACS CEO, CFO Resign After Stock Options Probe

Mark A. King, Affiliated Computer Services (ACS) chief executive and president, and Warren D. Edwards, the company’s chief financial officer, on Monday tendered their resignations after a probe into past stock options practices at the information technology services company revealed that both men had violated its code of ethics, the Associated Press reports via BusinessWeek.com.

Fifty-two-year-old Lynn Blodgett, ACS’ chief operating officer, was chosen to immediately replace King as CEO and president; and 49-year-old John Rexford, executive vice president of corporate development, is the company’s new chief finance executive, according to the AP.

King and Edwards are expected to stay with the firm until June 30, 2007, to assist with the transition, the AP reports.

In response to both a pending Securities and Exchange Commission (SEC) probe and a subpoena to appear before a grand jury issued by the U.S. attorney for the Southern District of New York, ACS in September delayed filing its annual financials and said it would launch an internal investigation into possible backdating of stock options going back to 1994, according to the AP. Backdating is when a firm assigns past values to stock that are higher than current values to make them look more appealing to investors.

The internal probe discovered that along with former CEO Jeffery Rich, King and Edwards, only one additional existing management staffer was aware of the backdating, according to the AP.

ACS plans to continue its investigation, and it estimates the non-cash compensation costs associated with the backdating of options to be around $51 million, not including a number of tax-related expenditures, the AP reports.

The news comes at time when a large number of firms—many of which are technology companies—are under investigation by the SEC and other authorities for possible stock options backdating.

Related Links:

• Apple: CEO Steve Jobs Knew of Backdating

• Three Ex-Brocade Execs Charged in Stock Options Probe

• Big Changes at McAfee in Wake of Stock Options Scandal

• Novell Launches Internal Stock Options Probe

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