Pension Funds Press CACI on Iraq Prison Role
By Ellen McCarthy
Washington Post Staff Writer
Friday, June 11, 2004; Page E01
CACI International Inc. is facing growing pressure from California pension funds that own large stakes in the company over its role in the Abu Ghraib prison scandal, prodded by the California state treasurer who says the company owes its shareholders a full explanation.
Directors of one of the funds, the California Public Employees' Retirement System, or Calpers, plan to meet Monday to discuss concerns about management controls, training and legal procedures at the Arlington-based government contractor.
CACI employs Steven Stefanowicz, an interrogator in Iraq who has been implicated in an Army report on prisoner abuses at the U.S.-run prison near Baghdad. Calpers said the company needs to explain what it did to train and supervise interrogators and to protect shareholders from the risk associated with that work.
"It's not only bad practice from a social perspective, but it's bad practice from a company perspective," said Sean Harrigan, Calpers president of administration. "We would be remiss in our responsibility as trustees and fiduciaries if we didn't take a look at [this]. We think it would be appropriate for us to enter into a dialogue with the CEO."
Harrigan said its board will ask CACI chief executive J.P. "Jack" London to answer questions spelled out by California Treasurer Philip Angelides in a letter recently sent to both Calpers and the California State Teachers' Retirement System (CalSTRS).
"I'm deeply concerned about the nature of corporate conduct here. . . . I have been troubled about what seems to be a denial of reality or denial of responsibility for what happened at Abu Ghraib," Angelides said in an interview yesterday.
"What the management of this company owes [shareholders] is a full explanation of exactly what has occurred, exactly who was responsible and a full accounting of what will be done to reform its practices."
Angelides sits on the boards of both funds. Together, Calpers and CalSTRS own 286,982 shares of CACI, the largest public pension fund holding in the company.
CalSTRS's subcommittee on corporate governance is planning to discuss the issue at its next meeting on July 7, according to spokeswoman Sherry Reser.
As shareholders, the retirement funds have several avenues of recourse if they are not satisfied with CACI's answers, Angelides said, including selling shares of the company, filing lawsuits and mobilizing other shareholders to take action.
Questions posed in the letter include whether CACI provided sufficient training for its interrogators, what kind of management controls it had over its interrogators, and what steps it took to ensure that CACI employees conformed with the law.
The letter also asked if the company's legal counsel reviewed the legality of providing interrogation services through CACI's blanket purchase agreement for information technology services, and if CACI disclosed to board members and investors the interrogation services and the risks they posed.
The letter questioned: "Was the company aware of the alleged abuse at Abu Ghraib, and, if not, why not? At what point were members of the board of directors made aware of events there? On what basis did CACI's chief executive Dr. J.P. London conclude that Mr. Stefanowicz had done 'a damn fine job,' as he stated in a conference call last month with financial analysts."
CACI has received a copy of the treasurer's letter, according to spokesperson Jody Brown, but has received no further communication from the funds' directors. She declined to comment further.
CACI's stock has shed 16 percent of its value since it was reported that Stefanowicz was named in an Army report on prisoner abuses. Shares of CACI dropped 40 cents yesterday, to close at $38.16.
Separately, CACI responded yesterday to a lawsuit filed Wednesday by a nonprofit legal center on behalf of several Iraqi prisoners. It alleges that CACI and Titan Corp. conspired with the government to commit abuses. "The suit alleges a plethora of heinous acts that the company rejects and denies in their totality," CACI said in a statement. The company also is being investigated by the General Services Administration to determine whether it misused an information technology contract. The GSA is trying to decide whether CACI should be banned from competing for future government contracts. Last year, 92 percent of its revenue came from federal customers.
© 2004 The Washington Post Company