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Iraq: CACI Probed on Keeping Future Government Contracts

by Chelsea EmeryReuters
May 27th, 2004

NEW YORK - Federal officials are investigating whether employees of defense contractor CACI International Inc. were involved in prisoner abuse in Iraq and whether the company should remain eligible for government contracts, CACI said on Thursday.

The news sent shares of CACI, which provides interrogation services to the U.S. military in Iraq, to their biggest one-day decline in more than two years, down 12 percent to a 10-month low.

Though the company's services in Iraq provide a relatively small part of its overall revenue, investors and analysts are watching carefully to see if the scandal will cause CACI to lose any government business.

CACI said it is the subject of five separate government probes. The U.S. General Services Administration has asked the company to provide information to aid in determining whether it should remain eligible for government contracts, CACI said in a conference call with analysts and investors.

"It's alarming," said Tim Quillin, an analyst with investment firm Stephens Inc.

He said it is extremely rare for a company to lose government contracts entirely, but the possibility makes investors nervous.

CACI was one of two U.S. contractors named in a U.S. Army report that detailed the abuse of inmates held in the Abu Ghraib prison in Baghdad. The other contractor was Titan Corp. .

In the period August-December last year, CACI was awarded 11 "task orders," or contracts, worth about $66 million for work in Iraq, the company said in the conference call.

So far, the company, which also provides information technology services to government clients, has billed $16.3 million under those contracts. Through April, it had collected $7.1 million.

Asked if CACI might have difficulty collecting the rest of the money due for its work, the company said its customers have said the work done so far has been "very satisfactory" and clients "continue to request our services."

A CACI representative said companies are barred from government contracts "only under the most egregious situations" where impropriety is condoned by corporate leadership.

"That is not the way this company operates," the representative said.

CACI said it is cooperating fully with all government inquiries and would provide the GSA and other investigators with the requested information.

CACI shares were down $3.81 to $38.61 in morning trade on the New York Stock Exchange after touching a low $37.10 earlier in the session.

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