TSP board seeks appeal to court ruling

The board that runs the Thrift Savings Plan asked Attorney General John Ashcroft on Thursday to appeal a Federal Claims Court ruling that will allow American Management Systems to sue for breach of contract.

The TSP board and AMS have been locked in a series of legal battles since the board fired the Fairfax, Va.-based contractor in July 2001. The board hired AMS in 1997 to modernize the Thrift Savings Plan's computer system to provide federal employees with more tools to manage their 401k-style retirement accounts. The $30 million project was slated for completion by May 2000. After four years and four delays, the TSP board fired AMS.

AMS challenged the board's action in Federal Claims Court and is seeking payment for work it performed while under contract. In its financial report filed Aug. 14 with the Securities and Exchange Commission, AMS said it has approximately $58.5 million of unpaid expenses related to the TSP contract.

The board moved to dismiss the case, arguing that the court did not have jurisdiction because the board does not rely on public funds to do its job. The board covers its administrative expenses with fees charged to plan participants' accounts, which the board says are private funds.

In an Aug. 30 ruling, the court rejected the board's argument, saying the money initially starts out as appropriated funds from Congress.

Board Chairman Roger Mehle, in a Sept. 4 letter to Ashcroft, called the ruling "profoundly wrong," adding, "This opinion will cause shock and confusion to federal employees if not immediately and vigorously opposed by both the board and the administration."

Justice Department officials said they are reviewing the ruling and have not decided whether to appeal.

Mehle also asked the attorney general not to interfere with separate litigation in which the board is suing AMS for $350 million in damages. Last November, a federal court ruled that the board could not file a suit independent of the Justice Department. The board is appealing that ruling. In January, Justice filed a brief before the appeals court arguing that only it-and not the board-has authority to sue the company. The board did not seek initial approval from Justice to bring the suit.

A Justice Department official said the department has not changed its position. He pointed out that the department is representing the board before the claims court.