Thrift Board Seeks to Continue AMS Suit

The Federal Retirement Thrift Investment Board said Dec. 3 it will seek an expedited appeal of a district court decision throwing out its $350 million lawsuit against American Management Systems Inc.

The U.S. District Court said last week that Roger Mehle, the board's executive director, needs Department of Justice approval to sue Fairfax, Va.-based AMS. The board accuses AMS of bungling a contract to update the agency's record-keeping system used to manage federal employees' retirement accounts.

Mehle called the decision "clearly erroneous." The investment board will appeal the decision to the U.S. Court of Appeals and, if necessary, to the Supreme Court, the agency said in a release.

The agency also sent a letter to Congress appealing for clarifying legislation that would allow the suit to go forward. "It is inconceivable that Congress intended to deny litigation authority" to us, Mehle said Dec. 3.

The board manages the retirement accounts of 2.6 million former and current federal employees, making it one of the largest defined-contribution plans in the world. It has $100 billion in investments.

In 1997, the agency hired AMS to make its system, developed in the mid-1980s, more efficient. The project was to take three years and cost $30 million, according to the agency.

But by July, the thrift board said it was frustrated by delays and AMS' assertion that it needed an additional $57 million to finish. AMS denied that it bungled the contract, but Mehle sued on the agency's behalf, asking for $350 million.

The U.S. District Court ruled that Mehle hadn't received the Department of Justice approval to sue and couldn't do so independently.

AMS declined to comment, but it has previously vowed to vigorously contest the claim.

"The ruling does not constitute a final resolution of the dispute between the thrift board and AMS," the company said last week in a press release.

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