Buck owner sues execs over attempted salePosted On: Feb. 4, 2007 12:00 AM CST
NEW YORKUnhappy with the ownership of Buck Consultants L.L.C., two recently departed top Buck executives--without authorization from the benefit consulting firm's parent--allegedly pursued deals with venture capitalists to sell Buck, according to a lawsuit.
The suit brought by Affiliated Computer Services Inc., the Dallas-based technology giant that purchased Buck in 2005, charges that the motivation behind the alleged actions of Howard Fine, then Buck's chairman of the board and an ACS senior managing director, and Christopher Michalak, then an executive managing director, was "simply for the reason that they personally would like to own Buck instead of ACS owning Buck."
Additionally, the suit charges that Messrs. Fine and Michalak communicated with other employees at New York-based Buck, one of the nation's oldest and largest benefit consulting firms, asking them to resign if ACS didn't sell to a venture capital group that included the two executives.
The suit filed last month also charges the two made unauthorized disclosures of confidential and proprietary Buck information to outsiders "as part of their attempt to find venture capital financing for a purchase of Buck."
Through their statements and conduct, Messrs. Fine and Michalak, both of whom left Buck last month, "falsely portrayed to the financial community, Buck employees and potentially, Buck customers and prospects that Buck 'is on the auction block,"' according to the suit filed in state court in New York.
The suit says the defendants' false statements will likely damage Buck's relationships with current and prospective clients, who might hesitate to do business if they believed Buck was for sale.
An ACS spokesman said the company will "pursue every available remedy we deem appropriate to address this situation."
ACS named David Bywater, formerly chief operating officer for ACS human resources outsourcing, as senior managing director--human capital management solutions to replace Mr. Fine. Jan Grude, previously managing director of ACS/Buck's Canadian operations and now executive managing director at Buck Consultants, replaced Mr. Michalak. Both will be based in New York.
Mr. Fine's attorney, Susan Brune, a partner at Brune & Richard L.L.P. in New York, said: "The allegations are untrue and without merit. Mr. Fine strongly denies any wrongdoing. This lawsuit is about attacking the good reputation of a man who worked tirelessly to grow Buck and ACS, and to ensure that Buck was well-managed and viable in the long term."
Mr. Michalak, who lives in a Chicago area suburb, declined comment.
The suit comes nearly two years after ACS, a $5 billion business process and information technology outsourcing company, announced it was purchasing Mellon Financial Corp.'s HR consulting and services unit for $465 million. The Mellon unit was comprised largely of Buck Consultants, which it purchased in 1997 for $225 million, and Unifi Network, a benefit consulting and outsourcing arm of PricewaterhouseCoopers L.L.P., which Mellon bought in 2002 for $275 million.
ACS does not disclose Buck's revenue, though its suit against the ex-Buck executives describes Buck is the sixth-largest U.S. HR consulting company.
Filling a need
When the purchase was announced, ACS executives described it as one that would fill a key need for the company. While ACS was a giant in the business process and information technology outsourcing sectors, traditional benefit consulting and employee benefit plan administration was a hole that it believed its purchase of the Mellon unit would fill.
"We will gain significant expertise in benefit consulting and retirement plan administration," said Lesley Pool, ACS' chief marketing officer at the time.
Mr. Fine, then managing director-retirement at Mellon Human Resources & Investor Solutions in New York, at the time of the purchase said the Mellon unit would bring critical benefit consulting and administrative services that ACS lacked.
"Clients are looking for more integrated solutions," Mr. Fine said, referring to employer interest in securing benefit consulting, benefit administration and business process outsourcing services from a single vendor (BI, March 21, 2005).
Mr. Fine also said he expected the integration of the Mellon unit to go smoothly due to the overlap in services provided by ACS and Mellon.
Others, though, say there have been strains in the relationship.
"There are cultural differences between an outsourcing firm and a consulting firm and that can make a smooth integration difficult, especially when the consulting firm had a legacy of being independent," said Donn Bleau, national practice leader for benefits and outsourcing at Solomon-Page Group L.L.C., a retained executive search firm in San Diego.
ACS, in its suit says its intention always has been to retain ownership in Buck and grow the business. "We are committed to this business," an ACS spokesman said.