Keane fires a top candidate for CEO

Boston technology services firm Keane Inc., still recovering from the resignation of a chief executive accused of sexual harassment, yesterday said it had fired the executive many on Wall Street had expected to succeed him.

The company said it dismissed Richard S. Garnick , its president of North American services and global business lines, for ``just cause" relating to unspecified travel expenses and unauthorized communications. In a statement, Keane said it would not release details of the incidents because it was a personnel matter.

Interim chief executive John J. Leahy last night said he made the decision to terminate Garnick, effective immediately, after consulting with lawyers inside and outside the company. The lawyers and Keane's board of directors agreed Garnick's actions ``had the potential to be very damaging to the company and its shareholders," said Leahy, though he would not discuss specifics.

Garnick said in an interview that he did nothing wrong, and the company was using two incidents as an excuse to withhold more than $2 million it had agreed to pay him if he wasn't named chief executive. ``We were driving positive changes," Garnick said. ``People felt uncomfortable. They used these incidents as a means to fight that change."

Boston lawyer Patrick J. Bannon , an attorney for Garnick, said his firm, McCarter & English, was preparing a breach of contract lawsuit against Keane and would seek to recover the money owed to Garnick. ``There was no basis for termination," Bannon said. ``This is damaging to an executive's reputation."

Word of Garnick's dismissal, released after the market closed, came as Keane also cut its third-quarter guidance, citing a slowdown in sales growth. The company, based in Charlestown, said it now expects to earn 16 cents to 18 cents a share in the July-to-September period, down from the 18 to 20 cents it had forecast. On the revenue side, Keane estimated it will ring up $230 million to $232 million, down from its earlier expectation of $240 million to $250 million.

A subcommittee of Keane's board has been interviewing candidates to replace Brian T. Keane , the son of the company's founder, who resigned as chief executive May 10 after two female employees internally lodged harassment complaints. Keane, denying the accusations, admitted to ``poor judgment" in his personal conduct. The company paid $1.14 million to settle one complaint, and an undisclosed sum to settle the other.

The board's search panel is scheduled to name a chief executive by the end of the year, said Russell J. Campanello , the company's senior vice president for human resources. Garnick, who had been recruited by Brian Keane from Indian outsourcing giant Wipro, had been considered a leading candidate. Other candidates include Leahy, a company veteran, and some outside executives.

Leahy, Garnick, and Campanello have been working together as a transition team known as the ``office of the president" since May.

Garnick said he was told of his dismissal Monday. He said the company cited a one-day business trip he made to Washington on Sept. 13 when he met with representatives of the Carlyle Group private equity firm, an information technology trade association, and a potential recruit for Keane. All the meetings were related to Keane business, Garnick said, though he acknowledged he also discussed ``potential opportunities" with Carlyle if he wasn't named Keane's chief executive. Garnick said Keane officials were aware of those discussions.

Keane executives also confronted Garnick, he said, about a Sept. 21 e-mail exchange he had with a New York public relations representative, Hugh Burnham of Gutenberg PR. Burnham alerted him that Wachovia Securities analyst Edward Caso had downgraded Keane's stock rating from ``outperform" to ``market perform" because of Caso's concern that Keane would tap an outside chief executive who would be slower to change the company's business model.

In his response to Burnham, which Garnick provided to the Globe last night, he wrote, ``Thanks for the note. Any way to get some expanded press to follow-up on this that puts pressure on board to make move?" Garnick said this was a reference to the chief executive search.

Leahy insisted Garnick's firing was justified. ``In our view, there were certainly grounds for termination," he said. On the issue of severance, he said, ``Any agreement we had would have ended with his dismissal." Leahy would not comment on a potential lawsuit.

Keane informed its employees of Garnick's dismissal yesterday and plans to disclose a restructuring next week in which a pair of veteran executives will be promoted to new jobs on the leadership team, taking over Garnick's responsibilities, Leahy said.

``I think there will be concern that there could be more distractions," Leahy said. ``But we're a resilient company, and we're moving very quickly in terms of laying out a new organization."

Robert Weisman can be reached at weisman@globe.com.