ACS chairman told by board to fess up about buyout bid

March 22, 2007
By Peter Samuel
pic by Shelley Katz
pic by Shelley Katz
A "Dear Darwin" letter to Darwin Deason, chairman of the board of ACS from the remainder of the board demands that he come clean on details of his agreements with his partner Cerberus fund and rejects his proposal for an early exclusivity agreement in the proposed $6b private buy-up of the firm.

Deason is said to have about 40% of shares in the publicly traded company, which has huge customer service operations for E-ZPass in the northeast and for Fastrak electronic tolling in the San Francisco Bay Area. The Wall Street Journal says Deason has control of a majority of a second class of stock and that he can therefore control the fate of the company, so the board's demands may be empty talk.

Cerberus already has investments in other computer services companies and recently bought a majority share in GMAC, troubled General Motor's spun-off financing arm.

Deason and other top ACS figures were caught up in the recent stock options backdating fraud in which they manipulated the strike price of options to maximize their personal gains. Others were thrown out but Deason got through the scandal. He never exercised the options that were backdated, so his gains at that point were paper gains.

Deason, now 66, is a farm boy from Arkansas about whom wild stories are told. The stories seem to revolve around a raging temper. One involves him trying to kill a cook on his yacht during a cruise. He cruises a lot in the Mediterranean and Caribbean between bouts of frenetic work.

The company's different units seem to have very different reputations. Their parking meter division has been a cesspool of corruption, non-performance and mismanagement for many years. Their work in Washington DC was recently the subject of a devastating audit, and they are in court charged with bribery to obtain a contract in Alberta, Canada. By contrast their toll services people are quite solid and well regarded. They got their big break when a WorldCom spinoff MFS was thrown out of New Jersey E-ZPass and they were selected in a no-compete deal to clean up. They performed well there and have retained the huge E-ZPass back office business in NY/NJ ever since.

Deason is described as tireless, having a fetish for order, a collector of glamorous women, being a brilliant dealmaker and negotiator, a great manager, and as having demanding culinary standards - if the story about the cook on the yacht is to be believed. He only has a high school education but the story is with $50 from his dad he took off from his home in rural Arkansas in a beaten up Pontiac for the nearest big city Tulsa OK where he landed a low level job with Gulf Oil, but rose rapidly. He then moved to MTech, a Dallas data processing company where he rose to CEO.

People love him or loathe him. He has frequently been accused of wrongdoing but nothing has ever stuck - so far.

TOLLROADSnews 2007-03-21

ADDITION: The Wall Street Journal reports this morning (Mar 22) that Deason is still the focus of an active criminal investigation in the matter of the stock option backdating at ACS. It says a small sticky "Post-It" note personalized under Deason's name and in his handwriting said that the company "has always priced (he means dated - TRnews) stock strike price on options at lowest (price) so far in qtr". The note written in the summer of 2002 was found attached to company paperwork and was handed over to investigators by the company.

This undermines the company's claim that Deason knew nothing about options backdating, but it remains to be established whether it was illegal at the time. Laws have changed.

TOLLROADSnews 2007-03-22


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