AMS Settles Mississippi Lawsuit for $185 Million

By William Welsh, Staff Writer


AUG. 29-American Management Systems Inc. has negotiated a settlement with the state of Mississippi over a disputed tax project, agreeing to pay the state $185 million in damages, the Fairfax, Va.-based company announced.


A Mississippi jury Aug. 23 ordered AMS to pay $474.5 million in actual and punitive damages because the company allegedly failed to properly develop and install an automated tax system for the Mississippi State Tax Commission. The court on Aug. 28 dismissed the civil case with prejudice in recognition of the settlement.


Most of the $185 million will be paid by AMS' insurers, according to the company. AMS said it would take a $23.5 million after-tax charge in the fiscal third quarter, ending Sept. 30, to cover the company's costs associated with the settlement.


When the case was filed in 1999, Mississippi sought actual and punitive damages totaling $984 million. The original contract was valued at $11.2 million.


Investors applauded news of the settlement, sending AMS' stock up $4.5 to $21.31 in trading Tuesday on the Nasdaq Stock Market. The stock had dropped 31 percent from $21.81 on Aug. 24 after the jury's decision.


"While we believe in the facts of our case, the appeals process would have taken up to two years and been extremely distracting for our management and employees," said Paul Brands, AMS' chairman and chief executive officer. "We believe this course will better serve our clients' and shareholders' interests. This issue is now behind us, and we are moving forward to continue serving our private and public sector clients with creative solutions, growing our business, and working to increase shareholder value."


Some market analysts are concerned that the lawsuit and settlement might make vendors reluctant to pursue business with the state government, but Mississippi state officials said such concerns are unwarranted.


"Contractors with integrity have nothing to fear from last week's verdict and this week's settlement," said a joint statement from the Mississippi State Tax Commission and Mississippi Department of Information Technology Services. "The State of Mississippi is ready to move forward with any private vendor, including AMS, willing to give our citizens what they have a right to expect-their money's worth in technology."