GM Unit Loses Round as Ruling Is Upset : Appeals Court Upholds Perot’s Pact With Postal Service
Texas billionaire H. Ross Perot won the latest round in his ongoing battle with General Motors on Thursday, when a federal appeals court in Washington overturned an earlier ruling that had blocked a major contract between Perot’s new company and the U.S. Postal Service.
Perot was jubilant about the decision favoring his new company Perot Systems.
“My official response,” he declared in a telephone interview from his Dallas office, “is that neither rain nor sleet nor snow nor General Motors can keep the Postal Service or Perot Systems from their appointed rounds.”
At issue in the Thursday decision was a two-part contract awarded to Perot Systems to study and then implement cost-saving changes in Postal Service operations.
Electronic Data Systems, the Dallas-based computer services company that Perot founded with $1,000 in 1962 and sold to GM in 1984 for $2.5 billion, had challenged Perot’s contract, arguing that it had been awarded without competitive bidding.
A federal contract appeals board agreed with EDS and another competitor, and it canceled the contract. The federal appeals court decision Thursday overturned that ruling.
The ruling came just days after EDS moved against Perot on a second front. Earlier this week, EDS filed a lawsuit in Virginia charging that Perot violated the terms of his $700-million buyout from GM when he started Perot Systems.
“This was their best case,” Perot said of EDS’ appeal of the Postal Service contract. “That Virginia case is nothing.”
A spokesman for EDS said Thursday that the company still believes that Perot’s contract with the Postal Service is “anti-competitive,” and indicated that EDS and GM plan to lobby Congress to have it overturned.
“We are confident Congress will look into” the contract, said Roger Still, a spokesman for EDS in Dallas. “We are making sure our best interests are represented, and we anticipate further activity from Congress.”
The appeals court ruling comes just two days after EDS filed a suit against Perot in a local court in Virginia seeking an injunction against Perot and Perot Systems to stop them from competing with EDS.
The Virginia lawsuit appears to be GM’s most direct assault on Perot, its one-time in-house critic, since he was ousted from the company’s board of directors in 1986. The first hearing in that case has been scheduled for Oct. 13 in Fairfax County, Va., Circuit Court.
Perot, in his $700-million buyout agreement with GM, agreed not to compete directly with EDS or hire away its executives for a period of time that is now under dispute in the lawsuit.
Perot argues that he was allowed to start competing and recruit EDS staffers 18 months after his ouster; GM contends that he was barred for three years. Perot says he was only prohibited from making a profit from a competing firm for three years but could set up a company that didn’t make any money after 18 months.
The contract with the Postal Service, which represents Perot Systems’ first major business, was awarded just days after the first 18-month phase elapsed and was structured so that Perot Systems won’t make a profit from it until three years after the GM buyout.
Still, the Perot contract has caused a minor controversy in Congress, where questions were raised about the way in which he was awarded a potentially lucrative deal with no competitive bidding. Some in Congress also questioned the novel, profit sharing arrangement Perot had worked out with the Postal Service.
The contract, divided into two phases, calls initially for Perot Systems, which has offices in Dallas and Vienna, Va., to conduct a 90-day, $500,000 study of Postal Service operations, to determine ways to cut costs with new technology and automation. The second phase would allow the firm to actually make the changes it recommends and be paid in the form of a percentage of the cost savings the Postal Service gains.
Contract on Hold
Under pressure from Congress, Postmaster General Anthony M. Frank pledged in August that, if Perot was allowed to go ahead with the contract, he would be limited to the first study phase. He would be prohibited from carrying out any of the cost-cutting measures his firm recommends--and thus wouldn’t get a share of the savings.
But EDS wants Perot completely out of the contract. “We’re not satisfied with the revision offered by the Postal Service,” Still said.
Meanwhile, the Postal Service, which had suspended Perot’s contract pending the outcome of the court case, said Thursday that the contract will remain on hold, at least until officials there study the court’s ruling.
Perot also believes that he hasn’t heard the last from GM and EDS. “You know what their next attack will be?” he asked, mockingly. “They’re going to come down here and have my lawyers tested for steroids.”
