Anatomy of an implosion

The Washington Post offers a look inside Tier, the troubled company that specialized in processing child-support payments for state and local governments. Tier went public in 1997, grew steadily, moved to DC in 2004, and showed an ability to win contracts from government. It all came crashing down this year, though, as the company faces an SEC investigation, independent auditors are questioning the accounting, and the stock was removed from NASDAQ.

Corporate malfeasance and suspect bookkeeping played a big role:

Tier's 2004 investment in a pension management firm turned into a money loser, and Tier executives lost about $500,000 investing company money in mutual funds. The entire accounting department quit when the firm left California. According to SEC filings, company officials said they had faced trouble hiring people and rebuilding the necessary expertise.

But local governments cut back on spending and competition caught the company off guard.

[L]ocal governments have been spending less on child-support payment services in recent years, and more competitors have been moving into the market, forcing Tier to concentrate on alternative businesses, said Matthew McKay, a senior analyst at San Francisco-based Jeffries & Co.

The field "was becoming more competitive," McKay said. In addition, Tier had a falling out with Affiliated Computer Services Inc., which Tier had partnered with on some government work. Tier recently agreed to cooperate with a federal grand jury investigation of ACS for possible mishandling of government bids and is now, McKay said, "a competitor to its once-partner."