AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
which includes attorneys' fees and pre judgment interest, but excludes additional attorneys' fees of approximately $0.9 million
and post judgment interest at the statutorily mandated rate of 10% per annum, which could be awarded in the event the
plaintiffs are successful upon appeal and final judgment. The judgment was appealed by the plaintiffs and us.
On August 29, 2002, the Fourteenth Court of Appeals, Houston, Texas, reversed the trial court's judgment and remanded the
case to the trial court for further proceedings. However, the court of appeals affirmed the trial court judgment in part as to one
of the plaintiffs. The court of appeals also held that the trial court did not err in dismissing certain of our affirmative defenses
at a pretrial conference. We and the plaintiffs filed motions for rehearing with the court of appeals. On January 16, 2003, the
court of appeals denied both motions for rehearing (except the court reversed its previous ruling that the trial court should have
applied prejudgment interest at 6% rather than 10%).
On March 3, 2003, we filed a Petition for Review with the Texas Supreme Court requesting that the Court reverse the decision
of the court of appeals and render judgment that the plaintiffs take nothing or, alternatively, remand the case to the trial court
for further proceedings. The plaintiffs did not file a petition for review with the Texas Supreme Court. On June 19, 2003, the
Texas Supreme Court requested that the parties file briefs on the merits of the appeal. We filed our brief on the merits on
August 20, 2003, and the plaintiffs brief on the merits is currently due by October 9, 2003.
We continue to believe that we have a meritorious defense to all or a substantial portion of the plaintiffs' claims, and
accordingly, have not accrued any amount on our balance sheet related to the lawsuit.
One of our subsidiaries, ACS Defense, Inc., and several other government contractors received a grand jury document
subpoena issued by the U.S. District Court for the District of Massachusetts in October 2002. The subpoena was issued in
connection with an inquiry being conducted by the Antitrust Division of the U.S. Department of Justice. The inquiry concerns
certain IDIQ (Indefinite Delivery Indefinite Quantity) procurements and their related task orders which occurred in the late
1990s at Hanscom Air Force Base in Massachusetts. Our revenue from the contracts that we believe to be the focus of the
Justice Department's inquiry is approximately $25 million per year representing approximately 0.6% of our annual revenue.
We are conducting an ongoing internal investigation of this matter through outside legal counsel and we are cooperating with
the Department of Justice in producing documents in response to the subpoena and arranging for Department of Justice
interviews of employees and former employees.
Another of our subsidiaries, ACS State & Local Solutions, Inc., and a teaming partner of this subsidiary, Tier Technologies,
Inc. ("Tier"), received a grand jury document subpoena issued by the U.S. District Court for the Southern District of New
York in May 2003. The subpoena was issued in connection with an inquiry being conducted by the Antitrust Division of the
U.S. Department of Justice. The inquiry concerns the teaming arrangement between ACS and Tier Technologies on child
support payment processing contracts awarded to ACS and Tier Technologies, as a subcontractor to ACS, in New York,
Illinois and Ohio. Our annual revenue from these three contracts will be approximately $70 million when the services are fully
implemented, representing approximately 1.8% of our annual revenue. Our teaming arrangement also contemplated the
California child support payment processing request for proposals which is expected to be issued in September or October
2003; however, we
have not entered into a teaming agreement with Tier for California and do not expect that we and Tier
Technologies, Inc. will team together on a proposal in response to this request for proposals. We are conducting an ongoing
internal investigation of this matter through outside legal counsel and we are cooperating with the Department of Justice in
producing documents in response to the subpoena.
Due to the preliminary nature of these government inquiries, it is difficult to assess the impact, if any, of these inquiries on
In addition to the foregoing, we are subject to certain other legal proceedings, inquiries, claims and disputes which arise in the
ordinary course of business. Although we cannot predict the outcomes of these proceedings, we do not believe these actions,
in the aggregate, will have a material adverse effect on our financial position, results of operations or liquidity.