May 02, 2007 10:21 ET

Cerberus ACS Buyout Highlights Need for Greater Public Accountability of Private Equity Deals

WASHINGTON, DC -- (MARKET WIRE) -- May 2, 2007 -- Plagued by charges of conflict of interest, Cerberus' bid for Affiliated Computer Services (ACS) highlights the need for greater public accountability and transparency of private equity deals as well as an examination of current tax laws that allow private equity companies to pocket profits at a cut rate. Because 41 percent of ACS's revenues come from government contracts, the loss of transparency that would come with a private equity buyout also raises concerns about the use of public funds. To track the deal, go to

Already, some have raised questions about the role of ACS Chairman Darwin Deason's role in the buyout offer. Even the lead director of ACS has raised questions about how a truly competitive bid can be made given Cerberus' exclusive agreement with Deason to negotiate a take-private transaction of the company.

Additionally, given ACS's number of government contracts, Cerberus' role in the on-going scandal at Walter Reed has raised concerns about how a Cerberus takeover of ACS will impact consumers, clients, and taxpayers. Cerberus-owned IAP Worldwide Services was responsible for operation and administrative support at the Walter Reed Medical Center during the scandal involving substandard treatment of veterans. IAP's arrival at Walter Reed in January 2006 (after winning a five-year $120 million contract) was accompanied by a reduction in medical and support staff at the facility, implicating the firm in the scandal at the military hospital.

Cerberus was founded in 1992 by former Drexel Burnham Lambert trader, Steven Feinberg. A hedge fund that has since emerged as a major private equity player, Cerberus is one of the largest and most diversified private investment firms in the world. Today, the firm has controlling or minority interests in companies that generate more than $60 billion in annual revenues, including such well-known brand names as Formica, Mervyn's, and Ageis Mortgage.

The private equity buyout industry, armed with more than a half-trillion dollars of capital, is today engineering financial deals that together are larger than the annual budgets of most of the world's countries. This financial juggernaut is generating hefty returns to its investors, extraordinary riches for its executives, and newly relevant questions about the impact of its business practices on American workers, businesses, communities, and the nation.

Last week, SEIU released a set of principles designed to address the concerns of investors, the public, and workers including:

--  The buyout industry should play by the same set of rules as everyone
    else, including providing transparency and disclosure about their
    businesses, supporting equitable tax rates, and eliminating conflicts of
    interest and other potential abuses in their transactions;
--  Workers should have a voice in the deals and benefit from their
    outcome; and
--  Community stakeholders, including consumer organizations and the
    public, should have a voice in the deals and benefit from their outcome.
SEIU members participate in pension funds with more than $1 trillion in assets, most of which invest 5 percent to 10 percent of their assets in private equity. SEIU is a longtime advocate of responsible corporate governance practices and an active member of the Council of Institutional Investors, an organization of more than 130 pension funds whose assets exceed $3 trillion.

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Contact Information

  • Contact:
    Renee Asher