Keane gets $7.3 million following contract dispute

Keane Inc. and Signal Corp. have concluded a long-running contract dispute that went through an arbitration panel and three rounds of court hearings, with Boston-based Keane receiving a $7.3 million arbitration award after the Virginia Supreme Court rejected Signal's latest appeal.

The nonrecurring gain from the award, which Keane received from Signal on Feb. 10, resulted in the company boosting its cash earnings per share estimate for the first quarter of 2003 to 14 to 16 cents per share, up 6 cents from the previous guidance of 8 cents to 10 cents per share.

Despite the sizable impact on earnings for the first quarter, Keane spokeswoman Margo Nison downplayed the significance of the boost.

"The adjustment was more of a technicality," Nison said. "The investment community is more concerned about corporate performance."

The dispute between the two companies began in 2000, when Keane initiated an arbitration proceeding against Signal of Fairfax, Va., seeking damages for breach of an agreement between Signal and Keane's federal systems subsidiary.

"Keane was a subcontractor to Signal, providing services to the Federal Highway Authority," Nison said. "Signal improperly terminated the contract, [which] had one year and one quarter left on the agreement."

A three-member arbitration panel in 2001 decided the subcontract had been wrongfully terminated, and that Signal had also violated a "no-hire" clause in the subcontract, after it hired away more than 20 Keane employees to work on the FHA contract, Nison said.

Signal appealed the arbitration panel's decision to the Virginia courts, but lost every challenge, including the state Supreme Court's Jan. 10 upholding of the panel's award, Nison said.

Signal was purchased by Veridian Corp. of Arlington, Va., in Sept. 2002. Dennis Gauci, a spokesman for Veridian, said the company was aware of the suit before it acquired Signal.

"The previous owners of Signal put money away in the escrow [account] to pay for it, so it didn't affect us one way or another," Gauci said.

The amount that Signal would have paid Keane for simply completing the work on the subcontract was "significantly less" than the arbitration award, Nison said.