Integral Systems CEO resigns amid controversy

Company explores possible sale but stays mum over Chamberlain’s departure

Friday, April 28, 2006

Integral Systems Inc., roiled by internal conflicts for months, is trying to regroup following the resignation of its CEO, who faces sex-offense charges in Howard County.

Steven R. Chamberlain, who was also chairman, resigned last week from the Lanham provider of satellite ground systems, according to a company filing with the U.S. Securities and Exchange Commission.

However, Chamberlain will ‘‘remain active” as Integral explores a possible sale, president Thomas L. Gough wrote in the filing.

Other than its SEC filings, the company is staying mum.

‘‘Management does not wish to comment at this time regarding the company moving forward, or Steven Chamberlain’s resignation,” said spokeswoman Tory Walker.

Two weeks ago, Integral hired BB&T Capital Markets⁄Windsor Group as an investment banker to ‘‘explore strategic alternatives, including a possible sale of the company, in order to maximize shareholder value,” according to an SEC filing.

The same day, board member Bonnie K. Wachtel, who has been openly critical of management, resigned.

Following Chamberlain’s resignation April 21, Peter J. Gaffney, 46, took over as CEO. Gaffney’s base salary was $208,150 last year. R. Doss McComas, a 52-year-old director, has taken over as chairman.

Wachtel said she was ‘‘somewhat surprised” by Chamberlain’s resignation, but doesn’t believe he was forced out. Wachtel said she was told that Chamberlain left ‘‘to give Gaffney a chance at the helm and to remove his legal troubles from Integral discussions.”

‘‘The company has clearly signaled that it’s on a path to be acquired,” Wachtel said, adding she expects a sale ‘‘within a few months.”

Chamberlain, a company founder, had been Integral’s chairman and CEO since June 1992. He has been a director of the company since 1982, when the company was formed. Chamberlain was vice president from 1982 to 1988, and then took over as president until 1992.

In 2004, the Tech Council of Maryland named him Executive of the Year.

Gaffney, who graduated from the University of Maryland, College Park, in 1981, was COO and executive vice president of Integral’s government division since August. Previously, he was executive vice president of commercial products from April 2002 to August 2005. Earlier, Gaffney was a design engineer for General Electric Co.

Integral’s troubles began in January, when Wachtel wrote a letter to the board declining re-election and questioning Chamberlain’s leadership and whether the company should be sold.

Late last year, Chamberlain was indicted by a Howard County grand jury on two felony charges: sexual abuse of a minor and a third-degree sex offense. Two previous misdemeanor charges against Chamberlain were dropped.

In her letter, Wachtel, a board member since 1988, said she received ‘‘an unusual phone call” from Chamberlain, asking her to resign, ‘‘based on a wide-ranging critique of my personality.”

‘‘In my opinion, this call was inappropriate and unwarranted,” Wachtel wrote. ‘‘It is also my opinion that Mr. Chamberlain has a highly unusual personality, which merits more attention by shareholders and the Board.”

Despite the turmoil, Integral continues to post strong numbers.

The company reported record-setting first-quarter revenues of $29.3 million, up 33 percent from the prior-year quarter. Net income for the quarter was $3.1 million, up from $1.2 million the previous year.

Integral reported revenues of $97.7 million and net income of $6.3 million for 2005.