UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

BEARINGPOINT, INC.

DELAWARE		22-3680505
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)
100 Crescent Court, Suite 700, Dallas, TX		75201
(Address of principal executive offices)		(Zip Code)

     Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  YES o  NO þ

     Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  YES o  NO þ

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES o  NO þ

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o No þ

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).  YES o  NO þ

     As of June 30, 2008, the aggregate market value of the voting stock held by non-affiliates of the Registrant, based upon the closing price of such stock on the New York Stock Exchange on June 30, 2008, was approximately $176.0 million.

     The number of shares of common stock of the Registrant outstanding as of May 1, 2009 was 4,416,987.

 

 

TABLE OF CONTENTS

				Page
		Description		Number
		PART I.
Item 1.		Business			1
Item 1A.		Risk Factors			6
Item 1B.		Unresolved Staff Comments			11
Item 2.		Properties			11
Item 3.		Legal Proceedings			12
Item 4.		Submission of Matters to a Vote of Security Holders			14
		PART II.
Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			15
Item 6.		Selected Financial Data			18
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operation			20
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk			47
Item 8.		Financial Statements and Supplementary Data			48
Item 9.		Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			48
Item 9A.		Controls and Procedures			49
Item 9B.		Other Information			51
		PART III.
Item 10.		Directors, Executive Officers and Corporate Governance			52
Item 11.		Executive Compensation			55
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			74
Item 13.		Certain Relationships and Related Transactions, and Director Independence			77
Item 14.		Principal Accounting Fees and Services			78
		PART IV.
Item 15.		Exhibits, Financial Statement Schedules			79
EX-10.24
EX-10.34
EX-10.35
EX-10.36
EX-10.40
EX-10.41
EX-10.46
EX-10.47
EX-10.49
EX-10.50
EX-10.54
EX-10.56
EX-10.58
EX-10.68
EX-10.70
EX-10.78
EX-10.92
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I.

FORWARD-LOOKING STATEMENTS

     Some of the statements in this Annual Report on Form 10-K (this “Annual Report”) constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements relate to our operations and are based on our current expectations, estimates and projections. Words such as “may,” “will,” “could,” “would,” “should,” “anticipate,” “predict,” “potential,” “continue,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “goals,” “in our view” and similar expressions are used to identify these forward-looking statements. The forward-looking statements contained in this Annual Report include, without limitation, statements about our reorganization proceedings under chapter 11 of the U.S. Bankruptcy Code, the potential sale of all or substantially all of our businesses and assets, our ability to continue as a going concern, the value of our common stock, our internal control over financial reporting, our results of operation and our financial condition. Forward-looking statements are only predictions and as such, are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events or our future financial performance that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements. The reasons for these differences include changes that occur in our continually changing business environment and the risk factors enumerated in Item 1A, “Risk Factors.” As a result, these statements speak only as of the date they were made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

AVAILABLE INFORMATION

     We were incorporated as a business corporation under the laws of the State of Delaware in 1999. Our principal offices are currently located at 100 Crescent Court, Suite 700, Dallas, Texas 75201. Our main telephone number is (703) 747-3000.

     Our website address is www.bearingpoint.com. Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as any amendments to those reports, are available free of charge through our website as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”). Information contained or referenced on our website is not incorporated by reference into and does not form a part of this Annual Report.

     You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

     In this Annual Report, we use the terms “BearingPoint,” “we,” “the Company,” “our Company,” “our” and “us” to refer to BearingPoint, Inc. and its subsidiaries. All references to “years,” unless otherwise noted, refer to our twelve-month fiscal year.

     On December 5, 2008, our stockholders approved a one-for-fifty reverse stock split, which became effective on December 10, 2008. All references to share and per share data for all periods presented have been adjusted to give effect to this reverse stock split unless otherwise noted. The effect of the reverse stock split on 2006, 2005 and 2004 disclosures is unaudited.

ITEM 1. BUSINESS

General

     BearingPoint, Inc. is a provider of management and technology consulting services to commercial and public sector organizations around the world. Our core services, which include management consulting, technology solutions, application services and managed services, are designed to help our clients generate revenue, increase cost-effectiveness, manage regulatory compliance, integrate information and transition to “next-generation” technology. We believe we differentiate our services from others through our results, approach and people. Our collaborative and flexible approach, including our passionate and dedicated people who bring both deep management and technology experience to bear on solving our clients’ issues, is well recognized for producing innovative and effective solutions.

     Historically, in North America, we have delivered consulting services through our Public Services, Commercial Services and Financial Services industry groups (our “North American Industry Groups”), which provide significant industry-specific knowledge and service offerings. Historically, outside of North America, we have been organized on a geographic basis —Europe, the Middle East and Africa (collectively “EMEA”), the Asia Pacific region and Latin America (including Mexico).

     For more information about our operating segments, see “— North American Industry Groups” and “— International Operations,” Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Segments,” and Note 18, “Segment Information,” of the Notes to Consolidated Financial Statements.

     As of January 1, 2009, we combined three of our business segments: Commercial Services, Financial Services and Latin America and began managing the operations of these three segments as one combined segment reporting to a single segment leader, and realigned resources and internal management to gain synergies in both costs and revenue.

Chapter 11 Bankruptcy Proceedings and Sale Transactions

     On February 18, 2009 (the “Petition Date”), BearingPoint, Inc. and certain of its subsidiaries based in the U.S. (collectively, the “Debtors”) filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”).  The chapter 11 cases are being jointly administered under the caption “In re BearingPoint, Inc., et al.,” Case No. 09-10691 (REG) (the “Chapter 11 Cases”).  The Debtors will continue to manage their properties and operate their business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.  In addition, as part of the relief granted to the Debtors on the Petition Date, the Bankruptcy Court entered an order confirming that the Company’s subsidiaries that are domiciled outside of the United States are not part of the Chapter 11 Cases. The Debtors may pay all debts and honor all obligations arising in the ordinary course of their businesses after the Petition Date. However, the Debtors may not pay creditors on account of obligations arising before the Petition Date or engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court.

     As set forth in more detail below, the Company sold significant portions of its businesses and assets and has entered into agreements or is in negotiations to sell its remaining businesses and assets. It is expected that upon the consummation of these transactions the Company will wind down its operations and cease to operate as a going concern.

     On November 13, 2008, the New York Stock Exchange (the “NYSE”) notified the Company that it had decided to suspend trading in the Company’s common stock prior to market open on November 17, 2008, based on its determination that the trading price of the Company’s common stock was “abnormally low.” The Company appealed the NYSE’s decision to suspend the trading of its common stock; however, due to the commencement of the Chapter 11 Cases, the Company withdrew its appeal on March 5, 2009 and the Company’s common stock was delisted from the NYSE effective as of March 19, 2009.

     The decision to seek relief under the Bankruptcy Code was made after an exhaustive review of alternative options.  In addition to significantly reducing our debt burden, the bankruptcy filing resolved potential defaults relating to our near-term cash payment obligations, including the right of the holders of the $200.0 million 5.00% Convertible Senior Subordinated Debentures due 2025 (the “5.00% Convertible Senior Debentures”) to require us to repurchase the 5.00% Convertible Senior Debentures, as early as April 2009, at a purchase price equal to 100% of the principal amount of $200 million, plus any accrued and unpaid interest.  Our failure to repurchase these debentures pursuant to the holders’ option would have caused a cross default under certain other of our debentures and our $500.0 million senior secured credit facility dated as of May 18, 2007, as amended and restated on June 1, 2007 (the “2007 Credit Facility”). Such a cross default, in turn, would have caused all amounts outstanding thereunder to accelerate.  The bankruptcy filing also resolved the prospect that we would have to repay all of our outstanding debt in the event our common stock is delisted from the NYSE. The chapter 11 filing, however, has resulted in the acceleration of these debt obligations. Accordingly, they became automatically due and payable on the Petition Date, subject to an automatic stay pursuant to the Bankruptcy Code of any action to collect or recover a claim against the Debtors.

     On the Petition Date, the Debtors filed their “pre-arranged” proposed joint plan of reorganization (the “Plan”), which embodied the proposed terms of the Debtors’ restructuring. The Debtors’ secured lenders (the “Secured Lenders”), who are parties to the 2007 Credit Facility, agreed in principle to support the Plan. As proposed, the Plan provided, among other things, that:

	•		New Senior Secured Credit Facility.  The 2007 Credit Facility would be replaced with a new senior secured credit facility as follows: term loan in the amount of $272 million plus accrued interest and a synthetic letter of credit facility in the amount of up to $130 million; plus the issuance of new convertible preferred stock with a liquidation preference of $50 million, plus accrued and unpaid dividends, which would be convertible into class 3 common stock (as described below).
	•		Unsecured Debt.  All unsecured debt would be exchanged for three different classes of common stock. Holders of the 5.00% Convertible Senior Debentures and holders of the $40 million 0.50% Convertible Senior Subordinated Debentures due 2010 would receive shares of class 1 common stock. Holders of the $250 million 2.50% Series A Convertible Subordinated Debentures due 2024 and holders of the $200 million 2.75% Series B Convertible Subordinated Debentures due 2024 would receive shares of class 2 common stock. Certain general unsecured creditors would receive shares of class 3 common stock. The three classes of common stock would be entitled to the same dividends, distributions and voting rights, except that until the holders of class 1 common stock had received dividends and distributions of $240 million, such holders would be entitled to the dividend, distribution and voting rights (except with respect to the election of directors) of the holders of class 2 common stock.
	•		Existing Equity. All existing equity in the Company would be cancelled for no consideration.

     However, as previously announced and as discussed in more detail below, the Company has actively marketed the sale of its businesses and assets to potential bidders during the pendency of the Chapter 11 Cases. The Company expects that the proposed Plan will be modified to reflect the Sale Transactions described below. If the Company is successful in selling all or substantially all of its assets, it will result in the liquidation of the Company’s business and the Company would cease to operate as a going concern.

     In order for a plan of reorganization to be confirmed by the Bankruptcy Court, such plan must be voted on by holders of impaired claims and must satisfy certain requirements of the Bankruptcy Code.  Confirmation of a plan by a Bankruptcy Court would make the plan binding on the Debtors, any issuer of securities under the plan, any person acquiring property under the plan and any of the Debtors’ creditors or equity interest holders.  Subject to certain limited exceptions, the order confirming a plan of reorganization will generally discharge the Debtors from any debt that arose prior to the date the Debtors filed the Chapter 11 Cases, and substitutes for such debt the obligations specified under the confirmed plan.

     The Bankruptcy Court granted all of the relief sought by the Debtors on the Petition Date, including our motion for interim authority to use cash on which the Debtors’ Secured Lenders have asserted liens (the “Cash Collateral”), which provides us with continued access to funds to operate our business. The Debtors’ use of the Cash Collateral must be in accordance with a budget setting forth their anticipated cumulative cash receipts and expenditures on a weekly basis and all necessary and required cumulative expenses which the Debtors expect to incur during each week of the budget. The Debtors’ failure to use the Cash Collateral in accordance with the budget could, depending on the extent of the deviation, result in the Debtors losing access to the funds. The Bankruptcy Court also entered an interim order establishing notification procedures and restrictions in connection with holding and trading in our common stock and debt securities and certain of our other liabilities. The order is intended to preserve, to the greatest extent possible, the potential value of certain of our tax attributes, both during the pendency of the Chapter 11 Cases and following emergence from bankruptcy. A final hearing confirming our ability to use the Cash Collateral occurred on April 15, 2009.

     As required by the Bankruptcy Code, the United States Trustee for the Southern District of New York appointed an official committee of unsecured creditors on February 27, 2009.

     On March 5, 2009, the Debtors filed their schedules of assets and liabilities and their statements of financial affairs with the Bankruptcy Court. On March 11, 2009, the Bankruptcy Court issued an order establishing April 17, 2009 as the deadline for each person or entity other than a governmental unit (as defined in the Bankruptcy Code) to file a proof of claim against any of the Debtors to assert any claim.

     On March 23, 2009, the Company and certain of its subsidiaries entered into an Asset Purchase Agreement with Deloitte LLP pursuant to which the Company and certain of its subsidiaries agreed to sell a significant portion of their assets related to the Company’s North American Public Services business to Deloitte and Deloitte agreed to assume certain liabilities associated with these assets as set forth in the Asset Purchase Agreement (the “Deloitte Transaction”). On April 17, 2009, the Bankruptcy Court approved this sale. The closing of the Deloitte Transaction occurred on May 8, 2009. In connection with the closing, the Company received net proceeds of approximately $329.3 million (subject to certain contractual adjustments).

     Under the 2007 Credit Facility, the Company is obligated to repay the lenders amounts borrowed if it sells assets in excess of $15 million. The Bankruptcy Court’s order approving the Deloitte Transaction provided that all liens, claims, and encumbrances attached to the proceeds of such sale. While the undisputed amount of liens totaled $255 million, Wells Fargo and the Official Committee of Unsecured Creditors have entered into an agreed order stipulating that the disputed amount of such liens totals no more than $1.5 million in the aggregate. In accordance with the Bankruptcy Court’s order approving the Deloitte Transaction and the undisputed security interests of the lenders under the 2007 Credit Facility, on or about May 13, 2009, the Company made a payment in the amount of $255 million to Wells Fargo from the proceeds of the Deloitte Transaction.

     On April 2, 2009, BearingPoint International Bermuda Holdings Limited, an indirect subsidiary of the Company, entered into a Share Sale Agreement with PwC Advisory Co., Ltd. (“PwC Japan”), the Japanese member firm of the PricewaterhouseCoopers global network of firms, for the sale of the Company’s consulting business in Japan to PwC Japan (the “PwC Japan Transaction”). Pursuant to the Share Sale Agreement, PwC Japan agreed to purchase BearingPoint Co., Ltd. (Chiyoda-ku) (“BearingPoint Japan”), an indirect, wholly-owned subsidiary of the Company, through the purchase of all issued and outstanding shares of BearingPoint Japan. The Company generated cash of approximately $45 million in connection with the PwC Japan Transaction. In addition, in connection with the PwC Japan Transaction, PwC Japan assumed the intercompany debt owed by certain non-Debtor subsidiaries of the Company to BearingPoint Japan. The closing of the PwC Japan Transaction occurred on May 11, 2009.

     On April 17, 2009, the Company and certain of its subsidiaries entered into an Asset Purchase Agreement with PricewaterhouseCoopers LLP (“PwC”) pursuant to which the Company agreed to sell a substantial portion of its assets related to its North American Commercial Services business unit, including Financial Services (collectively, the “CS Business”), to PwC, and PwC agreed to assume certain liabilities associated with these assets (the “PwC U.S. Transaction”). In addition, an affiliate of PwC also entered into a definitive agreement to purchase the equity interests of BearingPoint Information Technologies (Shanghai) Limited (“BearingPoint China GDC”), a subsidiary of the Company that operates a global development center in China, and certain assets of a separate global development center in India (the “PwC China/India Transaction,” and together with the PwC U.S. Transaction, the “PwC Commercial Services Transaction”). On April 27, 2009, the Bankruptcy Court approved bidding procedures in connection with an auction of all or substantially all of the assets of the CS Business and BearingPoint China GDC (the “Auction”). The Auction was held on May 27, 2009 and concluded on May 28, 2009. At a hearing on May 28, 2009, the Bankruptcy Court approved PwC as the winning bidder at the Auction. Under the terms of the winning bid, the aggregate purchase price for the PwC Commercial Services Transaction to be paid by PwC is approximately $44 million (subject to certain contractual adjustments). The closing of the PwC Commercial Services Transaction is expected to occur by the end of June 2009 and is subject to customary closing conditions.

     On April 20, 2009, the Board of Directors of the Company authorized the Company to enter into a non-binding term sheet for the sale of its EMEA business to local management. Additionally, the Company is in negotiations with other parties and local management to sell its Latin America practices and sell various Asia Pacific practices other than BearingPoint Japan and BearingPoint China GDC and is in various stages of negotiations to sell certain remaining assets that were not, or will not be, sold pursuant to other transactions. These potential transactions, together with the Deloitte Transaction, the PwC Japan Transaction and the PwC Commercial Services Transaction, are referred to collectively as the “Sale Transactions.”

     The purpose of these Sale Transactions is to sell all or substantially all of our business and assets to third parties or local management. Although certain of the Sale Transactions must be approved by the Bankruptcy Court and the Sale Transactions are subject to a number of risks, we expect that the Plan will be modified to reflect the Sale Transactions and that the Chapter 11 Cases will result in a liquidation of BearingPoint’s business and assets under either chapter 11 or chapter 7 of the Bankruptcy Code, such that BearingPoint will cease to operate as a going concern. There can be no assurance that the Sale Transactions will be completed.

     Operating in bankruptcy imposes significant risks and uncertainties on our business. See Item 1A — “Risk Factors — Risks Relating to Bankruptcy” for a discussion of the risks and uncertainties relating to our business and investing in our securities as a result of the Chapter 11 Cases.

     Additional information about our Chapter 11 Cases is available on our website www.bearingpoint.com and can be found by clicking on “Restructuring Information.”  Our internet website and the information contained or incorporated therein are not intended to be incorporated into this Annual Report. 

Going Concern

     As discussed above, we expect that the Plan will be modified to reflect the Sale Transactions and that the Chapter 11 Cases will result in a liquidation of our business and assets under either chapter 11 or chapter 7 of the Bankruptcy Code, with the Debtors ceasing to operate as a going concern. In addition, Ernst & Young LLP’s report on the Company’s 2008 consolidated financial statements states that uncertainties inherent in the bankruptcy process raise substantial doubt about the Company’s ability to continue as a going concern.

North American Industry Groups

     Historically, our North American operations were managed on an industry basis, enabling us to capitalize on our significant industry-specific knowledge. We believe this focus enhanced our ability to monitor global trends and observe best practice behavior, to design specialized service offerings relevant to the marketplaces in which our clients operate, and to build sustainable solutions. All of our industry groups provided management consulting, technology solutions, application services and managed services to their respective clients.

     Prior to January 1, 2009, our three historical North American Industry Groups were:

	•		Public Services, serving a broad range of both public and private clients, including agencies of the U.S. Federal government such as the Departments of Defense, Homeland Security, and Health and Human Services; provincial, state and local governments; public healthcare companies and private sector healthcare agencies; aerospace and defense companies; and higher education clients. As described above, the closing of the sale of a significant portion of our assets related to our North American Public Services business pursuant to the Deloitte Transaction occurred on May 8, 2009.
	•		Commercial Services, supporting a highly diversified range of clients, including those in the life sciences and energy markets, as well as technology, consumer markets, manufacturing, transportation, communications and private and public utilities. As described above, we have entered into an agreement to sell a substantial portion of our assets related to our Commercial Services business pursuant to the PwC Commercial Services Transaction.
	•		Financial Services, directing its solutions to many of the world’s leading banking, insurance, securities, real estate, hospitality and professional services institutions. As described above, we have entered into an agreement to sell a substantial portion of our assets related to our Financial Services business pursuant to the PwC Commercial Services Transaction.

International Operations

     Our operations outside of North America historically have been organized on a geographic basis, with alignment to our three North American Industry Groups — enabling consistency in our global strategy and execution.

     Our three traditional geographic regions are:

	•		EMEA. As noted above, the Board of Directors of the Company authorized the Company to enter into a non-binding term sheet for the sale of its EMEA business to local management.
	•		Asia Pacific. As described above, the closing of the sale of our consulting business in Japan pursuant to the PwC Japan Transactions occurred on May 11, 2009.
			Pursuant to the PWC China/India Transaction, we have entered into agreements to sell two global development centers in the Asia Pacific region. We are also in separate negotiations with other parties and local management to sell various other Asia Pacific practices.
	•		Latin America. As noted above, we are in negotiations with other parties and local management to sell our Latin America practices.

Our Joint Marketing Relationships

     As of December 31, 2008, our alliance program had approximately 40 relationships with key technology providers that support and complement our service offerings. Through this program, we created joint marketing relationships to enhance our ability to provide our clients with high value services. Those relationships typically entail some combination of commitments regarding joint marketing, sales collaboration, training and service offering development.

Competition

     We operate in a highly competitive and rapidly changing market and compete with a variety of organizations that sell services similar to those we offer. Our competitors historically have included specialized consulting firms, systems consulting and implementation firms, former “Big 4” and other large accounting and consulting firms, application software firms providing implementation and modification services, service and consulting groups of computer equipment companies, outsourcing companies, systems integration companies, aerospace and defense contractors and general management consulting firms. We also compete with our clients’ internal resources. Some of our competitors have significantly greater financial and marketing resources, name recognition and market share than we do.

     We believe that the principal competitive factors in the markets in which we operate include scope of services, service delivery approach, technical and industry expertise, value added, availability of appropriate talent and resources, global reach, pricing and relationships.

Intellectual Property

     We compete based in part on our methodologies and other proprietary intellectual property rights. We rely upon a combination of nondisclosure and other contractual arrangements, non-solicitation agreements, trade secrets, copyright and trademark laws to protect our proprietary rights and the rights of third parties from whom we license intellectual property. We also enter into confidentiality and intellectual property agreements with our employees that limit the distribution of proprietary information. We have only a limited ability to protect our important intellectual property rights.

Customer Dependence

     During 2008 and 2007, our revenue from the U.S. Federal government, inclusive of government sponsored enterprises, was $1,031.7 million and $981.6 million, respectively, representing 32.3% and 28.4% of our total revenue, respectively. For 2008 and 2007, this included approximately $426.4 million and $378.7 million of revenue from the U.S. Department of Defense, respectively, representing approximately 13.3% and 11.0% of our total revenue for 2008 and 2007, respectively. While most of our government agency clients have the ability to unilaterally terminate their contracts, our relationships are seldom with political appointees, and we have not historically experienced a loss of U.S. Federal government business with a change in administration. For more information regarding government proceedings and risks associated with U.S. government contracts, see Item 3— “Legal Proceedings,” and Note 11, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements.

Employees

     As of December 31, 2008, we had approximately 15,200 full-time employees, including approximately 12,700 billable professionals. For 2008, our voluntary annualized attrition rate was 24.8%, a slight increase over our attrition rate of 24.7% in 2007. However, due to the Chapter 11 Cases and the closing of certain Sale Transactions, as of May 15, 2009, we had approximately 8,900 full-time employees.

ITEM 1A. RISK FACTORS

     You should carefully consider the risks described below before making an investment decision regarding our securities. The risks described below are not the only ones facing us. Additional risks not presently known to us or that we currently deem immaterial may also adversely affect our business or operations. Our business, financial condition or results of operations, cash flows or prospects could be materially and adversely affected by the occurrence of any of the matters included in these risks.

Risks that Relate to Our Bankruptcy and the Sale Transactions

     We are pursuing the sale of all or substantially all of our businesses pursuant to the Sale Transactions, which will result in the liquidation of our business and the Company ceasing to operate as a going concern.

     On May 8, 2009, the Company and certain of its subsidiaries sold a significant portion of our assets related to our North American Public Services business to Deloitte. On May 11, 2009, BearingPoint International Bermuda Holdings Limited, an indirect subsidiary of the Company, sold the Company’s consulting business in Japan to PwC Japan. On April 17, 2009, the Company and certain of its subsidiaries entered into an Asset Purchase Agreement with PwC pursuant to which we agreed to sell a substantial portion of our assets related to our Commercial Services business unit, including Financial Services, to PwC, and PwC agreed to assume certain liabilities associated with these assets. In addition, an affiliate of PwC also entered into a definitive agreement to purchase the equity interests of BearingPoint China GDC and certain assets of a separate global development center in India. On April 20, 2009, the Board of Directors of the Company authorized the Company to enter into a non-binding term sheet for the sale of its EMEA business to local management. Additionally, the Company is in negotiations with third parties and local management to sell its Latin America practices and sell various Asia Pacific practices other than BearingPoint Japan and BearingPoint China GDC and is in various stages of negotiations to sell certain remaining assets that were not, or will not be, sold pursuant to other transactions.

     The purpose of the Sale Transactions is to sell all or substantially all of our businesses to third parties or local management. Although not all of the Sale Transactions requiring Bankruptcy Court approval have been approved by the Bankruptcy Court at this time and the Sale Transactions are subject to a number of risks, we expect that the Plan will be modified to reflect the Sale Transactions and that the Chapter 11 Cases will result in a liquidation of our business and assets pursuant to a liquidation under either chapter 11 or chapter 7 of the Bankruptcy Code, with the Debtors ceasing to operate as a going concern. In any event, we do not expect any funds to be available for distribution to holders of our common stock or certain of our unsecured creditors. See “Risks that Relate to Our Common Stock” below.

     We are subject to the risks and uncertainties associated with bankruptcy proceedings as a result of our filing for reorganization under chapter 11 of the Bankruptcy Code on February 18, 2009.

     On February 18, 2009, we filed a voluntary petition with the Bankruptcy Court to reorganize under chapter 11 of the Bankruptcy Code. Our operations based outside the United States were not included in our filing. Although we are currently pursuing the sale of all or substantially all of our businesses pursuant to the Sale Transactions, we plan to continue to operate our business as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code while the Sale Transactions are pending. We expect that the Debtors’ Joint Plan of Reorganization under chapter 11 of the Bankruptcy Code that we originally filed with the Bankruptcy Court on February 18, 2009 will be modified to reflect the Sale Transactions. There can be no assurance that the Plan, as modified, will be approved by the Bankruptcy Court or that any conditions precedent to its implementation will be satisfied or when, if ever, such confirmation and satisfaction will occur. Failure to obtain such confirmation or to satisfy such conditions to implementation may result in lengthier chapter 11 proceedings as we attempt to negotiate and implement an alternative plan of reorganization.

     For the duration of the Chapter 11 Cases, our operations will be subject to the risks and uncertainties associated with bankruptcy and the Sale Transactions, which include, among other things:

	•		the relationships between us and our customers, employees, vendors, strategic partners and others may be negatively affected by the Chapter 11 Cases and the Sale Transactions, including risks that our customers will be less likely to purchase our services, that our employees will seek out other opportunities or lack proper motivation to fulfill their commitments and that vendors and strategic partners could terminate their relationships with us or require financial assurances or enhanced performance to continue their business relationships with us, which may be unduly burdensome on our business and operations;
	•		our ability to negotiate and consummate the Sale Transactions;

	•		the actions and decisions of our creditors and other third parties with interests in our Chapter 11 Cases may be inconsistent with our plans;
	•		objections to or limitations on our ability to obtain Bankruptcy Court approval with respect to motions in the Chapter 11 Cases that we may seek from time to time or potential adverse decisions by the Bankruptcy Court with respect to such motions;
	•		objections to or limitations on our ability to reject contracts that are burdensome or uneconomical;
	•		our ability to obtain and maintain commercially reasonable terms with vendors, strategic partners and service providers;
	•		our ability to obtain and maintain contracts that are critical to our operations;
	•		our ability to retain client engagements and maintain our billing and utilization rates;
	•		our ability to retain and motivate our managing directors and other key employees; and
	•		our ability to maintain adequate financing and cash on hand and to generate sufficient cash from operations.

     These risks and uncertainties could affect our business and operations in various ways. For example, negative events or publicity associated with our Chapter 11 Cases could adversely affect our relationships with our customers, as well as with employees, which in turn could adversely affect our operations and financial condition, particularly if the Chapter 11 Cases are protracted. Also, transactions outside the ordinary course of business are generally subject to the prior approval of the Bankruptcy Court, which may limit our ability to respond in a timely manner to certain events or take advantage of certain opportunities. Third parties could propose and seek confirmation of their own plan or plans for reorganization. Any such third party plan or plans could disrupt our business, adversely affect our relationships with customers, vendors, strategic partners and employees, or otherwise adversely affect our results of operations and financial condition.

     Because of the risks and uncertainties associated with our chapter 11 proceedings, the ultimate impact of events that occur during these proceedings will have on our business, financial condition and results of operations cannot be accurately predicted or quantified. Our current Plan filed with the Bankruptcy Court provides, among other things, that all existing equity in the Company will be cancelled for no consideration. We do not expect that any modifications to the Plan, including those needed to reflect the Sale Transactions, would allow for distributions to holders of our common stock or certain of our unsecured creditors. We believe that the value of our common stock and various pre-petition liabilities is highly speculative. In addition, the Bankruptcy Court entered an interim order establishing notification procedures and restrictions in connection with holding and trading in our common stock and debt securities and certain of our other liabilities. Accordingly, extreme caution should be exercised with respect to existing and future investments in any of these securities or liabilities.

     Operating under the Bankruptcy Code may restrict our ability to pursue our business strategies.

     Under the Bankruptcy Code, we must obtain Bankruptcy Court approval to, among other things:

	•		sell assets outside the ordinary course of business;
	•		consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
	•		meet our capital needs;
	•		grant liens; and
	•		finance our operations, investments or other capital needs or to engage in other business activities that would be in our interest.

In addition, if a trustee is appointed to operate the Company while in chapter 11 bankruptcy, the trustee would assume control of our assets.

     Our liquidity position and our ability to continue as a going concern impose significant risks to our operations.

     Because of the public disclosure of our liquidity constraints, our ability to maintain normal contractual terms with many of our customers has become impaired. We may be required to obtain surety bonds, letters of credit or bank guarantees in support of an increased number of customer engagements. We have experienced restrictions on the availability of credit, which has further reduced our liquidity. In addition, due to our financial condition and results of operations, in particular with regard to our Chapter 11 Cases and the explanatory paragraph indicating that substantial doubt exists as to the Company’s ability to continue as a going concern contained in the audit report on our 2008 Financial Statements of our independent registered public accounting firm, we expect that customers will become more reluctant to enter into engagements with us.

     We will not be able to pursue our original Plan, as filed with the Bankruptcy Court on February 18, 2009.

     Although we filed a “pre-arranged” Plan with the Bankruptcy Court contemporaneously with our filing of the Chapter 11 Cases, we have since determined to proceed with the Sale Transactions. We expect to amend the Plan to reflect the Sale Transactions and do not expect to emerge from bankruptcy as a going concern. As a result of the Sale Transactions, we will not be able to pursue our original Plan, as filed with the Bankruptcy Court on February 18, 2009.

     If the conditions to closing the Sale Transactions are not satisfied, the Sale Transactions may be terminated, which would have a significant adverse impact on us and the Chapter 11 Cases.

     The Sale Transactions are subject to the satisfaction or waiver of various conditions, many of which are subject to uncertainty. The conditions to the consummation of the PwC Commercial Services Transaction include that the Chapter 11 Cases have not been dismissed or converted to a chapter 7 proceeding, and that no trustee or examiner has been appointed, and other customary closing conditions. There can be no assurance that the Chapter 11 Cases will not have been dismissed or converted to a chapter 7 proceeding prior to the consummation of the PwC Commercial Services Transaction.  The other Sale Transactions may contain similar or other conditions to closing, including Bankruptcy Court approval. If we are unable to satisfy these conditions to closing, we will not be able to consummate the Sale Transactions, which would have a significant adverse impact on us and the Chapter 11 Cases.

     The Sale Transactions could be negatively affected by current adverse conditions in financial markets.

     The financial markets have recently been, and continue to be, disrupted and volatile. In particular, the cost and availability of financing has been and may continue to be adversely affected by illiquid financial and credit markets. As a result, potential bidders and purchasers in the Sale Transactions may not be able to obtain the financing necessary to purchase our businesses, which may diminish the proceeds available for distribution to our creditors. Regardless of the outcome of the Sale Transactions, we do not expect any funds to be available for distribution to our stockholders or certain of our unsecured creditors.

     Failure to complete the Sale Transactions could negatively impact our business.

     If the Sale Transactions are not completed for any reason, we will be subject to several risks, including the following:

	•		having to convert from a proceeding under chapter 11 of the Bankruptcy Code to a liquidation proceeding under either chapter 11 or chapter 7 of the Bankruptcy Code;
	•		having to negotiate one or more alternative sale transactions, which may not create as much value as the Sale Transactions; and

•

having the focus of our senior management directed toward the proposed Sale Transactions instead of on our stand-alone operations.

     If the Sale Transactions are not completed, these risks may materialize and have a material adverse effect on our operations, business, financial results, financial condition and recoveries under an alternate plan of reorganization.

     The pursuit of the Chapter 11 Cases and the Sale Transactions have consumed and will continue to consume a substantial portion of the time and attention of our management, and certain aspects of the Sale Transactions will impact how our business is conducted, which may have an adverse effect on our business and results of operations.

     The requirements of the Chapter 11 Cases and the Sale Transactions have consumed and will continue to consume a substantial portion of our management’s time and attention and leave them with less time to devote to the operations of our business. This diversion of management’s attention may have a material adverse effect on the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the Chapter 11 Cases are protracted. In addition, certain aspects of the Sale Transactions will impact how our business is conducted, which may have an adverse effect on our business and results of operations.

     Uncertainty related to the Sale Transactions could have a material adverse effect on our business.

     Uncertainty about whether and when the Sale Transactions will be completed and expectations as to how the acquired businesses and assets will be operated after the consummation of the Sale Transactions could have a material adverse effect on our business, including through employee attrition (as discussed further in the risk factor below) and increased attempts by competitors to persuade our customers to change service providers. This would have a negative impact on our results of operations and financial condition.

     We have experienced increased levels of employee attrition, we have begun to reduce our workforce and our employees are facing considerable distractions and uncertainty, due to the Chapter 11 Cases and the Sale Transactions.

     Because of the Chapter 11 Cases and the Sale Transactions, we have experienced increased levels of employee attrition, and our employees are facing considerable distractions and uncertainty. In addition, we have started reductions of our workforce during the Chapter 11 Cases and expect to lose employees in connection with the acquisitions of our businesses pursuant to the Sale Transactions. A loss of key personnel or a substantial reduction in our workforce or material erosion of employee morale could have a material adverse effect on our business, particularly if the Chapter 11 Cases are protracted. Our ability to motivate and retain key employees is restricted by provisions of the Bankruptcy Code, which limit or prevent our ability to implement a retention program or take other measures intended to motivate key employees to remain with us throughout the pendency of the Chapter 11 Cases and the Sale Transactions without Bankruptcy Court approval. The loss of the services of any members of our senior management could impair our ability to execute our strategy and, as a result, could have a material adverse effect on our results of operations and financial condition.

     We will be subject to claims made after the date that we filed for bankruptcy and other claims that are not discharged in the Chapter 11 Cases, which could have a material adverse effect on our results of operations and financial condition.

     We are currently subject to claims in various legal proceedings and may become subject to other legal proceedings in the future. Although we will seek to satisfy and discharge all claims made against us prior to the date of the bankruptcy filing (which claims are generally stayed during the Chapter 11 Cases), we may not be successful in doing so. Claims made against our international operations (which were not included in our bankruptcy filing) are not stayed and will not be discharged in the Chapter 11 Cases. In addition, any claims arising after the date of our bankruptcy filing may not be subject to discharge in the Chapter 11 Cases. The outcome of each of these claims, including our ability to have such claims satisfied and discharged in the Chapter 11 Cases, cannot, at this time, be determined, nor can the liability that may potentially result from a negative outcome be reasonably estimated presently for every case. The liability that we may ultimately incur with respect to any of these claims (in the event of a negative outcome) may be in excess of amounts that have currently been accrued with respect to such claims and, as a result, may have a material adverse effect on our results of operations and financial condition.

     We likely will be unable to timely file certain periodic reports with the SEC.

     We did not timely file with the SEC this Annual Report or our Quarterly Report on Form 10-Q for the quarter ended March 31, 2009, and likely will continue to be unable to timely file our annual and quarterly periodic reports with the SEC in the future.

Following the commencement of the Chapter 11 Cases, our management has been particularly strained by the considerable attention required for administering the Chapter 11 Cases and marketing, negotiating and consummating the Sale Transactions. In addition, due to the continuing demands on management’s time and attention in connection with the Chapter 11 Cases and the Sale Transactions, as well as the significant employee attrition we have recently experienced and expect to continue to experience, we cannot make any assurances as to whether or when we will be able to complete and file our periodic reports in the future.

Risks that Relate to Our Common Stock

     Trading in our securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. Regardless of whether the Sale Transactions are consummated or an alternate plan of reorganization is confirmed by the Bankruptcy Court, our common stock likely will be cancelled and holders of such common stock likely will not receive any distribution with respect to, or be able to recover any portion of, such investment.

     Regardless of whether the Sale Transactions are consummated or an alternate plan of reorganization is confirmed by the Bankruptcy Court, it is highly unlikely that the proceeds from such sales would be sufficient to, or that any such plan of reorganization would, allow for distributions with respect to our common stock or certain of our unsecured creditors. Our common stock likely will be cancelled and extinguished upon the approval of the Bankruptcy Court and the holders thereof would not be entitled to receive, and would not receive or retain, any property or interest in property on account of such equity interests. Amounts invested by such holders in our outstanding equity securities likely will not be recoverable. As such, our currently outstanding equity securities likely have no value. Trading prices are very volatile and frequently bear no relationship to the expected recovery by the holders of such securities in the Chapter 11 Cases. In addition, the Bankruptcy Court also entered an interim order establishing notification procedures and restrictions in connection with holding and trading in our common stock and debt securities and certain of our other liabilities. Accordingly, we urge that extreme caution be exercised with respect to existing and future investments in our equity securities and any of our other securities.

     Our common stock has been delisted from the NYSE and is not listed on any other national securities exchange. It will likely be more difficult for stockholders and investors to sell our common stock or to obtain accurate quotations of the share price of our common stock.

     As a result of our failure to maintain certain standards for continued listing on the NYSE, on November 13, 2008, the Company received a notice from the NYSE that it had decided to suspend trading in the Company’s common stock on November 17, 2008, based on its determination that the trading price of the Company’s common stock was “abnormally low,” and to commence delisting proceedings. The NYSE filed a Form 25 to delist our common stock on March 9, 2009 and such delisting became effective on March 19, 2009. Due to the suspension of trading and delisting, our common stock is now traded over-the-counter.

     Stocks trading on the over-the-counter market are typically less liquid than stocks that trade on a national securities exchange. Trading on the over-the-counter market may also negatively impact the trading price of our common stock. In addition, the liquidity of our common stock may be impaired, not only in the number of shares that are bought and sold, but also through delays in the timing of transactions, and coverage by security analysts and the news media, if any, of our company. Stockholders may find it difficult to resell their shares of our common stock, due to the delisting and the likely effect of the Chapter 11 Cases on our common stock. The delisting of our common stock from the NYSE may also result in other negative implications, including the potential loss of confidence by customers, strategic partners and employees, and loss of institutional investor interest in our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

     None.

ITEM 2. PROPERTIES

     As of December 31, 2008, our properties consisted of leased office facilities for specific client contracts and for sales, support, research and development, consulting, administrative and other professional personnel. Prior to the closing of the Deloitte Transaction, our corporate headquarters consisted of approximately 235,000 square feet in McLean, Virginia. Our corporate headquarters are currently located at 100 Crescent Court, Suite 700, Dallas, Texas 75201. As of December 31, 2008, we occupied approximately 80

additional offices in the United States and approximately 50 offices in Latin America, Canada, the Asia Pacific region and EMEA. All of our office space generally is leased pursuant to operating leases that expire over various periods during the next 9 years. Portions of our office space are sublet under operating lease agreements that expire over various periods during the next 8 years and are also being marketed for sublease or disposition.

     Pursuant to the Bankruptcy Code, and subject to the approval of the Bankruptcy Court, the Debtors have the ability to reject unexpired leases of real property at their discretion. The Debtors are currently reviewing and have commenced rejecting various leases that they believe are no longer required as they proceed through the Sale Transactions and the liquidation of the Company. The rejection of these leases leads to a pre-petition claim for damages which is capped under the Bankruptcy Code.

ITEM 3. LEGAL PROCEEDINGS

Chapter 11 Cases

     On February 18, 2009, the Debtors filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York, as discussed in Item 1—“Business”. Under the Bankruptcy Code, the filing of a petition automatically stays most actions against the Company, including most actions to collect pre-petition indebtedness or to exercise control over the property of our bankruptcy estates. Absent further order of the Bankruptcy Court, no party, subject to certain exceptions, may take any action, also subject to certain exceptions, to recover on pre-petition claims against the Debtors. We expect substantially all of our pre-petition liabilities will be resolved under our plan of reorganization if not otherwise satisfied pursuant to orders of the Bankruptcy Court.

     At this time, it is not possible to predict the outcome of the Chapter 11 Cases or their effect on our business or certain claims and investigations being conducted by agencies or officers of the U.S. Federal government and arising in connection with our provision of services under contracts with agencies of the U.S. Federal government. Prior to the closing of the Deloitte Transaction, a significant portion of our business related to providing services under contracts with the U.S. Federal government or state and local governments, inclusive of government sponsored enterprises. These contracts are subject to extensive legal and regulatory requirements and, from time to time, agencies of the U.S. Federal government or state and local governments investigate whether our operations have been or are being conducted in accordance with these requirements and the terms of the relevant contracts. In the ordinary course of business, various government investigations are ongoing.

Overview

     We currently are a party to a number of disputes that involve or may involve litigation or other legal or regulatory proceedings. Generally, there are three types of legal proceedings to which we may be made a party:

	•		Claims and investigations arising from our inability to timely file periodic reports under the Exchange Act, and the restatement of our financial statements for certain prior periods to correct accounting errors and departures from generally accepted accounting principles for those years;
	•		Claims and investigations being conducted by agencies or officers of the U.S. Federal government and arising in connection with our provision of services under contracts with agencies of the U.S. Federal government; and
	•		Claims made in the ordinary course of business by clients seeking damages for alleged breaches of contract or failure of performance, by current or former employees seeking damages for alleged acts of wrongful termination or discrimination and by creditors or other vendors alleging defaults in payment or performance.

SEC Reporting Matters

     2005 Class Action Suits. In and after April 2005, various separate complaints were filed in the U.S. District Court for the Eastern District of Virginia, alleging that the Company and certain of its current and former officers and directors violated Section 10(b) of the Exchange Act, Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act by, among other things, making materially misleading statements between August 14, 2003 and April 20, 2005 with respect to our financial results in our SEC filings and press releases. On January 17, 2006, the court certified a class, appointed class counsel and appointed a class representative. The plaintiffs

filed an amended complaint on March 10, 2006 and the defendants, including the Company, subsequently filed a motion to dismiss that complaint, which was fully briefed and heard on May 5, 2006. We were awaiting a ruling when, on March 23, 2007, the court stayed the case, pending the U.S. Supreme Court’s decision in the case of Makor Issues & Rights, Ltd v. Tellabs, argued before the Supreme Court on March 28, 2007. On June 21, 2007, the Supreme Court issued its opinion in the Tellabs case, holding that to plead a strong inference of a defendant’s fraudulent intent under the applicable federal securities laws, a plaintiff must demonstrate that such an inference is not merely reasonable, but cogent and at least as compelling as any opposing inference of non-fraudulent intent. On September 12, 2007, the court dismissed with prejudice this complaint, granting motions to dismiss filed by the Company and the other named defendants. In granting the Company’s motion to dismiss, the court ruled that the plaintiff failed to meet the scienter pleading requirements set forth in the Private Securities Litigation Reform Act of 1995, as amended. On September 26, 2007, the plaintiffs filed a motion that seeks a reversal of the court’s order dismissing the case or an amendment to the court’s order that would allow the plaintiffs to replead. The Company filed its brief on October 17, 2007 and although a hearing on the plaintiffs’ motion was scheduled for November 16, 2007, the court canceled the hearing as not necessary. On November 19, 2007, the court issued an order denying the plaintiffs’ motion to amend or alter the court’s September 12, 2007 dismissal of this matter. The plaintiffs have appealed the matter to the U.S. Court of Appeals for the Fourth Circuit and oral argument was held on January 29, 2009. On April 8, 2009, the lead plaintiffs filed a Motion for Modification of Stay in BearingPoint’s Chapter 11 Cases, seeking to modify the automatic stay for the limited purpose of allowing the Fourth Circuit to render a decision on the plaintiffs’ appeal. By order dated May 7, 2009, the Bankruptcy Court granted the plaintiffs’ motion and modified the automatic stay solely to permit the Fourth Circuit to render its decision on the appeal. On May 7, 2009, the plaintiffs filed a status report with the Fourth Circuit advising of the Bankruptcy Court’s modification of the automatic stay.

     2005 Shareholder’s Derivative Demand. On May 21, 2005, we received a letter from counsel representing one of our shareholders requesting that we initiate a lawsuit against our Board and certain present and former officers of the Company, alleging breaches of the officers’ and directors’ duties of care and loyalty to the Company relating to the events disclosed in our report filed on Form 8-K, dated April 20, 2005. On January 21, 2006, the shareholder filed a derivative complaint in the Circuit Court of Fairfax County, Virginia, that was not served on the Company until March 2006. The shareholder’s complaint alleged that his demand was not acted upon and alleged the breach of fiduciary duty claims previously stated in his demand. The complaint also included a non-derivative claim seeking the scheduling of an annual meeting in 2006. On May 18, 2006, following an extensive audit committee investigation, our Board responded to the shareholder’s demand by declining at that time to file a suit alleging the claims asserted in the shareholder’s demand. The shareholder did not amend the complaint to reflect the refusal of his demand. We filed demurrers on August 11, 2006, which effectively sought to dismiss the matter related to the fiduciary duty claims. On November 3, 2006, the court granted the demurrers and dismissed the fiduciary claims, with leave to file amended claims. As a result of our annual meeting of stockholders held on December 14, 2006, the claim seeking the scheduling of an annual meeting became moot. On January 3, 2007, the plaintiff filed an amended derivative complaint re-asserting the previously dismissed derivative claims and alleging that the Board’s refusal of his demand was not in good faith. The Company and the other defendants renewed their motion to dismiss all remaining claims by filing demurrers, which argument was heard on March 23, 2007. On February 20, 2008, the court granted the demurrers and dismissed the claims with prejudice.

     SEC Investigation. On April 13, 2005, pursuant to the same matter number as its inquiry concerning our restatement of certain financial statements issued in 2003, the staff of the SEC’s Division of Enforcement requested information and documents relating to our March 18, 2005 Form 8-K. On September 7, 2005, we announced that the staff had issued a formal order of investigation in this matter. We subsequently have received subpoenas from the staff seeking production of documents and information, including certain information and documents related to an investigation conducted by our Audit Committee. We continue to provide information and documents to the SEC as requested. The investigation is ongoing and the SEC is in the process of taking the testimony of a number of our current and former employees, as well as one of our former directors.

     In connection with the investigation by our Audit Committee, we became aware of incidents of possible non-compliance with the Foreign Corrupt Practices Act and our internal controls in connection with certain of our operations in China and voluntarily reported these matters to the SEC and U.S. Department of Justice in November 2005. Both the SEC and the Department of Justice are investigating these matters in connection with the formal investigation described above. On March 27, 2006, we received a subpoena from the SEC regarding information related to these matters and has responded to their requests through the summer of 2006. We have not received any further requests since that time.

Government Contracting Matters

     Prior to the closing of the Deloitte Transaction, a significant portion of our business related to providing services under contracts with the U.S. Federal government or state and local governments, inclusive of government sponsored enterprises. These contracts are subject to extensive legal and regulatory requirements and, from time to time, agencies of the U.S. Federal government or state and local governments investigate whether our operations are being conducted in accordance with these requirements and the terms of the relevant contracts. In the ordinary course of business, various government investigations are ongoing. U.S. Federal government investigations of the Company, whether relating to these contracts or conducted for other reasons, could result in administrative, civil or criminal liabilities, including repayments, fines or penalties being imposed upon us, or could lead to suspension or debarment from future U.S. Federal government contracting. It cannot be determined at this time whether any findings, conclusions, penalties, fines or other amounts determined to be applicable to us in any such investigation could have a material effect on our results of operations or financial condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     As previously reported, on December 5, 2008, we held our 2008 Annual Meeting of Stockholders. Set forth below is information concerning each matter submitted to a vote at the meeting. The numbers of votes below do not reflect the one-for-fifty reverse stock split that became effective on December 10, 2008.

(1)

Election of Directors. Our stockholders elected the following persons as Class II directors to hold office until the annual meeting of stockholders to be held in 2011 and their respective successors have been duly elected and qualified.

Nominee for Class I Director		For				Withhold
Wolfgang H. Kemna			119,646,439				59,096,506
Albert L. Lord			103,531,942				75,211,003
J. Terry Strange			119,484,462				59,258,483

For		Against				Abstain
169,758,988			1,783,706				7,200,251
(3)     Amendment to the Amended and Restated Certificate of Incorporation. The Board of Directors amended and restated the Company’s Amended and Restated Certificate of Incorporation, effective immediately following the Company’s Annual Meeting, to permit the Board of Directors, at their discretion, to enact a reverse stock split of the Company’s common stock at a ratio within the range from one-for-ten and one-for-fifty at any time prior to January 16, 2009.
For		Against				Abstain
152,226,526			5,632,576				20,883,843

PART II.

ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

     Until November 17, 2008, our common stock was traded on the NYSE under the symbol “BE.” Because the trading price of our common stock was “abnormally low,” the NYSE suspended trading in our common stock and thereafter our common stock was delisted by the NYSE on March 19, 2009. In addition, we had previously fallen below the NYSE’s continued listing standard for minimum average closing price of $1.00 over a consecutive 30 trading day period and minimum average market capitalization of $100 million over a consecutive 30 trading day period. Since November 17, 2008, our common stock is traded the over-the-counter, including on the “Pink Sheets” and OTC Bulletin Board under the trading symbol “BGPTQ.”

     The following table sets forth the high and low sales prices for our common stock, adjusted for all periods to reflect the reverse stock split executed on December 10, 2008 as more fully described below, as reported on the NYSE and over-the-counter for the quarterly periods indicated.

Price Range of Common Stock

		Price Range of
		Common Stock
		High				Low
2008
Fourth Quarter			30.00				1.00
Third Quarter			72.00				25.00
Second Quarter			101.50				31.00
First Quarter			145.50				75.00
2007
Fourth Quarter			259.50				122.50
Third Quarter			382.00				191.50
Second Quarter			400.00				345.00
First Quarter			428.00				366.50

     Regardless of whether the Sale Transactions are consummated or an alternate plan of reorganization is confirmed by the Bankruptcy Court, it is highly unlikely that the proceeds from such sales would be sufficient to, or that any such plan or reorganization would, allow for distributions with respect to our common stock. These equity interests will likely be cancelled and extinguished without consideration upon the approval of the Bankruptcy Court and the holders thereof would not be entitled to receive, and would not receive or retain, any property or interest in property on account of such equity interests. Accordingly, we urge that extreme caution be exercised with respect to existing and future investments in the Company’s equity securities and any of the Company’s liabilities or other securities. In addition, the Bankruptcy Court also entered an interim order establishing notification procedures and restrictions in connection with holding and trading in our common stock.

Holders

     At April 27, 2009, we had approximately 227 stockholders of record.

Dividends

     We have never paid cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock. We intend to retain all of our earnings, if any, for general corporate purposes. Our 2007 Credit Facility contained limitations on our payment of dividends.

Reverse Stock Split

     At our 2008 Annual Meeting of Stockholders held on December 5, 2008, our stockholders approved an amendment to the Amended and Restated Certificate of Incorporation permitting the Board to effect, at its discretion, a reverse stock split of our common stock at a

ratio within the range from one-for-ten and one-for-fifty at any time prior to January 16, 2009. Upon stockholder approval, the Board approved the implementation of a one-for-fifty reverse stock split of our common stock. As a result of the reverse stock split, every fifty shares of our common stock that was issued and outstanding as of market close on the record date was automatically combined into one issued and outstanding share of common stock. The record date for the reverse stock split was December 10, 2008 and the split was effective at 6:01 p.m., Eastern Time, on the same date. As of the record date, we had 220,851,816 shares of common stock outstanding and upon the effectiveness of the reverse stock split, we had 4,417,037 shares of common stock outstanding. Instead of issuing fractional shares as a result of the reverse stock split, stockholders received cash payments for such fractional shares after our transfer agent sold all of the aggregated fractional shares of common stock.

Equity Compensation Plan Information
(as of December 31, 2008)

										Number of securities
										remaining available
		Number of securities				Weighted-average				for future issuance
		to be issued upon				exercise price of				under equity
		exercise of				outstanding				compensation plans
		outstanding options,				options, warrants				(excluding securities
Plan Category		warrants and rights				and rights				reflected in column (a))
Equity Compensation Plans Approved by Security Holders			934,510			$	506.49				1,177,690	(1)(2)
Equity Compensation Plans Not Approved by Security Holders			13,325	(3)		$	0.00				—
Total			947,835			$	506.49				1,177,690

Issuer Purchases of Equity Securities

     The following table provides information relating to our purchase of shares of common stock of the Company in 2008:

Approximate

Dollar Value of

Total Number of

Shares that May

Shares Purchased

Yet Be Purchased

as Part of

Under Publicly

Publicly

Announced Plans

Total Number of

Average Price

Announced Plans

or Programs

Period

Shares Purchased

per Share

or Programs(1)

($ in millions)(1)

January 1, 2008— December 31, 2008

2,321

(2)

$

65.85

—

$

64.3

COMPARATIVE STOCK PERFORMANCE

     Our Peer Group (the “Peer Group”) consists of Accenture Ltd, Computer Sciences Corporation, Electronic Data Systems Corporation (acquired by HP in August of 2008) and Cap Gemini SA. We believe that the members of the Peer Group are most comparable to us in terms of client base, service offerings and size.

     The following graph compares the total stockholder return on our common stock from 2004 through 2008 with the total return on the Standard & Poor’s (“S&P”) 500 Index and the Peer Group. The graph assumes that $100 is invested initially and all dividends are reinvested.

ITEM 6. SELECTED FINANCIAL DATA

     Our selected financial data is derived from our audited Consolidated Financial Statements and related Notes included elsewhere in this report as of and for the years ended December 31, 2008, 2007 and 2006. The selected data as of and for the years ended December 31, 2005 and 2004 are also derived from audited financial statements, unless noted otherwise. Through June 30, 2003, our fiscal year ended on June 30. In February 2004, our Board approved a change in our fiscal year-end to a twelve-month period ending December 31. Selected financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” and the Consolidated Financial Statements and the related Notes included herein.

Statements of Operations

		Year Ended
		December 31,				December 31,				December 31,				December 31,				December 31,
		2008				2007				2006				2005				2004
		(in thousands, except per share amounts)
Revenue		$	3,197,041			$	3,455,562			$	3,444,003			$	3,388,900			$	3,375,782
Costs of service:
Costs of service(1)(2)			2,521,254				2,966,168				2,863,856				3,001,327				2,816,559
Lease and facilities restructuring charge			(3,524	)			20,869				29,621				29,581				11,699
Total costs of service			2,517,730				2,987,037				2,893,477				3,030,908				2,828,258
Gross profit			679,311				468,525				550,526				357,992				547,524
Amortization of purchased intangible assets			—				—				1,545				2,266				3,457
Goodwill impairment charge(3)			—				—				—				166,415				397,065
Selling, general and administrative expenses(1)(2)			550,818				701,317				748,250				750,867				641,176
Operating income (loss)			128,493				(232,792	)			(199,269	)			(561,556	)			(494,174	)
Insurance settlement			—				—				38,000				—				—
Interest /other expense, net(4)			(91,811	)			(57,698	)			(19,774	)			(37,966	)			(17,644	)
Loss on early extinguishment of debt			—				—				—				—				(22,617	)
Income (loss) before taxes			36,682				(290,490	)			(181,043	)			(599,522	)			(534,435	)
Income tax expense(5)			68,754				72,233				32,397				122,121				11,791
Net income (loss) applicable to common stockholders(6)			(32,072	)			(362,723	)			(213,440	)			(721,643	)			(546,226	)
Income (loss) per share:
Net (income) loss applicable to common stockholders — basic and diluted		$	(7.18	)		$	(83.90	)		$	(50.30	)*		$	(179.50	)*		$	(138.61	)*

Balance Sheet Data

		December 31,				December 31,				December 31,				December 31,				December 31,
		2008				2007				2006				2005				2004
		(in thousands)
Cash, cash equivalents, and restricted cash(7)		$	353,132			$	468,518			$	392,668			$	376,587			$	265,863
Total assets			1,654,915				1,981,404				1,939,240				1,972,426				2,182,707
Long-term liabilities(8)			1,336,135				1,538,801				1,078,930				976,501				648,565
Total debt			976,916				974,643				671,850				674,760				423,226
Total liabilities(8)			2,201,146				2,450,693				2,116,541				2,017,998				1,558,009
Total stockholders’ (deficit) equity(8)			(546,231	)			(469,289	)			(177,301	)			(45,572	)			624,698

Note: On February 18, 2009, the Debtors filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. The selected financial data set forth above does not reflect the impact of the Chapter 11 filing.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

     The following Management’s Discussion and Analysis of Financial Condition and Results of Operation (“MD&A”) should be read in conjunction with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements included elsewhere in this Annual Report. This Annual Report contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements.”

Overview

     Historically, we strived to be recognized as the world leader in management and technology consulting, admired for our passion and respected for our ability to solve our clients’ most important challenges. We provide strategic consulting applications services, technology solutions and managed services to government organizations, Global 2000 companies and medium-sized businesses in the United States and internationally. Historically, in North America, we provided consulting services through our Public Services, Commercial Services and Financial Services industry groups in which we focused significant industry-specific knowledge and service offerings to our clients. Outside of North America, historically, we were organized on a geographic basis, with operations in EMEA, the Asia Pacific region and Latin America.

     Chapter 11 Bankruptcy Proceedings and Sale Transactions

     On February 18, 2009, the Debtors filed voluntary petitions for relief under the Bankruptcy Code in the Bankruptcy Court.  The chapter 11 cases are being jointly administered under the caption “In re BearingPoint, Inc., et al.,” Case No. 09-10691 (REG) (the “Chapter 11 Cases”).  The Debtors will continue to manage their properties and operate their business as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.  In addition, as part of the relief granted to the Debtors on the Petition Date, the Bankruptcy Court entered an order confirming that the Company’s subsidiaries that are domiciled outside of the United States are not part of the Chapter 11 Cases. The Debtors may pay all debts and honor all obligations arising in the ordinary course of their businesses after the Petition Date. However, the Debtors may not pay creditors on account of obligations arising before the Petition Date or engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court.

     As set forth in more detail below, the Company has sold significant portions of its businesses and assets and has entered into agreements or is in negotiations to sell its remaining businesses and assets. It is expected that upon the consummation of these transactions the Company will wind down its operations and cease to operate as a going concern.

     On November 13, 2008, the NYSE notified the Company that it had decided to suspend trading in the Company’s common stock prior to market open on November 17, 2008, based on its determination that the trading price of the Company’s common stock was “abnormally low.” The Company appealed the NYSE’s decision to suspend the trading of its common stock; however, due to the commencement of the Chapter 11 Cases, the Company withdrew its appeal on March 5, 2009 and the Company’s common stock was delisted from the NYSE effective as of March 19, 2009.

     The decision to seek relief under the Bankruptcy Code was made after an exhaustive review of alternative options.  In addition to significantly reducing our debt burden, the bankruptcy filing resolved potential defaults relating to our near-term cash payment obligations, including the right of the holders of the 5.00% Convertible Senior Debentures to require us to repurchase the 5.00% Convertible Senior Debentures, as early as April 2009, at a purchase price equal to 100% of the principal amount of $200 million, plus any accrued and unpaid interest.  Our failure to repurchase these debentures pursuant to the holders’ option would have caused a cross default under certain other of our debentures and our 2007 Credit Facility. Such a cross default, in turn, would have caused all amounts outstanding thereunder to accelerate.  The bankruptcy filing also resolved the prospect that we would have to repay all of our outstanding debt in the event our common stock is delisted from the NYSE. The chapter 11 filing, however, has resulted in the acceleration of these debt obligations. Accordingly, they became automatically due and payable on the Petition Date, subject to an automatic stay pursuant to the Bankruptcy Code of any action to collect or recover a claim against the Debtors.

     On the Petition Date, the Debtors filed the Plan, which embodied the proposed terms of the Debtors’ restructuring. The Secured Lenders, who are parties to the 2007 Credit Facility, agreed in principle to support the Plan. As proposed, the Plan provides, among other things, that:

	•		New Senior Secured Credit Facility.  The 2007 Credit Facility would be replaced with a new senior secured credit facility as follows: term loan in the amount of $272 million plus accrued interest and a synthetic letter of credit facility in the amount of up to $130 million; plus the issuance of new convertible preferred stock with a liquidation preference of $50 million, plus accrued and unpaid dividends, which would be convertible into class 3 common stock (as described below).
	•		Unsecured Debt.  All unsecured debt would be exchanged for three different classes of common stock. Holders of the 5.00% Convertible Senior Debentures and holders of the $40 million 0.50% Convertible Senior Subordinated Debentures due 2010 would receive shares of class 1 common stock. Holders of the $250 million 2.50% Series A Convertible Subordinated Debentures due 2024 and holders of the $200 million 2.75% Series B Convertible Subordinated Debentures due 2024 would receive shares of class 2 common stock. Certain general unsecured creditors would receive shares of class 3 common stock. The three classes of common stock would be entitled to the same dividends, distributions and voting rights, except that until the holders of class 1 common stock had received dividends and distributions of $240 million, such holders would be entitled to the dividend, distribution and voting rights (except with respect to the election of directors) of the holders of class 2 common stock.
	•		Existing Equity. All existing equity in the Company would be cancelled for no consideration.

     However, as previously announced and as discussed in more detail below, the Company has actively marketed the sale of its businesses and assets to potential bidders during the pendency of the Chapter 11 Cases. The Company expects that the proposed Plan will be modified to reflect the Sale Transactions described below. If the Company is successful in selling all or substantially all of its assets, it will result in the liquidation of the Company’s business and the Company would cease to operate as a going concern.

     In order for a plan of reorganization to be confirmed by the Bankruptcy Court, such plan must be voted on by holders of impaired claims and must satisfy certain requirements of the Bankruptcy Code.  Confirmation of a plan by a Bankruptcy Court would make the plan binding on the Debtors, any issuer of securities under the plan, any person acquiring property under the plan and any of the Debtors’ creditors or equity interest holders.  Subject to certain limited exceptions, the order confirming a plan of reorganization will generally discharge the Debtors from any debt that arose prior to the date the Debtors filed the Chapter 11 Cases, and substitutes for such debt the obligations specified under the confirmed plan.

     The Bankruptcy Court granted all of the relief sought by the Debtors on the Petition Date, including our motion for interim authority to use the Cash Collateral, which provides us with continued access to funds to operate our business. The Debtors’ use of the Cash Collateral must be in accordance with a budget setting forth their anticipated cumulative cash receipts and expenditures on a weekly basis and all necessary and required cumulative expenses which the Debtors expect to incur during each week of the budget. The Debtors’ failure to use the Cash Collateral in accordance with the budget could, depending on the extent of the deviation, result in the Debtors losing access to the funds. The Bankruptcy Court also entered an interim order establishing notification procedures and restrictions in connection with holding and trading in our common stock and debt securities and certain of our other liabilities. The order is intended to preserve, to the greatest extent possible, the potential value of certain of our tax attributes, both during the pendency of the Chapter 11 Cases and following emergence from bankruptcy. A final hearing confirming our ability to use the Cash Collateral occurred on April 15, 2009.

     As required by the Bankruptcy Code, the United States Trustee for the Southern District of New York appointed an official committee of unsecured creditors on February 27, 2009.

     On March 5, 2009, the Debtors filed their schedules of assets and liabilities and their statements of financial affairs with the Bankruptcy Court. On March 11, 2009, the Bankruptcy Court issued an order establishing April 17, 2009 as the deadline for each person or entity other than a governmental unit (as defined in the Bankruptcy Code) to file a proof of claim against any of the Debtors to assert any claim.

     On March 23, 2009, the Company and certain of its subsidiaries entered into an Asset Purchase Agreement with Deloitte LLP pursuant to which the Company and certain of its subsidiaries agreed to sell a significant portion of their assets related to the Company’s North American Public Services business to Deloitte and Deloitte agreed to

assume certain liabilities associated with these assets as set forth in the Asset Purchase Agreement (the “Deloitte Transaction”). On April 17, 2009, the Bankruptcy Court approved this sale. The closing of the Deloitte Transaction occurred on May 8, 2009. In connection with the closing, the Company received net proceeds of approximately $329.3 million (subject to certain contractual adjustments).

     Under the 2007 Credit Facility, the Company is obligated to repay the lenders amounts borrowed if it sells assets in excess of $15 million. The Bankruptcy Court’s order approving the Deloitte Transaction provided that all liens, claims, and encumbrances attached to the proceeds of such sale. While the undisputed amount of liens totaled $255 million, Wells Fargo and the Official Committee of Unsecured Creditors have entered into an agreed order stipulating that the disputed amount of such liens totals no more than $1.5 million in the aggregate. In accordance with the Bankruptcy Court’s order approving the Deloitte Transaction and the undisputed security interests of the lenders under the 2007 Credit Facility, on or about May 13, 2009, the Company made a payment in the amount of $255 million to Wells Fargo from the proceeds of the Deloitte Transaction.

     On April 2, 2009, BearingPoint International Bermuda Holdings Limited, an indirect subsidiary of the Company, entered into a Share Sale Agreement with PwC Advisory Co., Ltd. (“PwC Japan”), the Japanese member firm of the PricewaterhouseCoopers global network of firms, for the sale of the Company’s consulting business in Japan to PwC Japan (the “PwC Japan Transaction”). Pursuant to the Share Sale Agreement, PwC Japan agreed to purchase BearingPoint Co., Ltd. (Chiyoda-ku) (“BearingPoint Japan”), an indirect, wholly-owned subsidiary of the Company, through the purchase of all issued and outstanding shares of BearingPoint Japan. The Company generated cash of approximately $45 million in connection with the PwC Japan Transaction. In addition, in connection with the PwC Japan Transaction, PwC Japan assumed the intercompany debt owed by certain non-Debtor subsidiaries of the Company to BearingPoint Japan. The closing of the PwC Japan Transaction occurred on May 11, 2009.

     On April 17, 2009, the Company and certain of its subsidiaries entered into an Asset Purchase Agreement with PricewaterhouseCoopers LLP (“PwC”) pursuant to which the Company agreed to sell a substantial portion of its assets related to its North American Commercial Services business unit, including Financial Services (collectively, the “CS Business”), to PwC, and PwC agreed to assume certain liabilities associated with these assets (the “PwC U.S. Transaction”). In addition, an affiliate of PwC also entered into a definitive agreement to purchase the equity interests of BearingPoint Information Technologies (Shanghai) Limited (“BearingPoint China GDC”), a subsidiary of the Company that operates a global development center in China, and certain assets of a separate global development center in India (the “PwC China/India Transaction,” and together with the PwC U.S. Transaction, the “PwC Commercial Services Transaction”). On April 27, 2009, the Bankruptcy Court approved bidding procedures in connection with an auction of all or substantially all of the assets of the CS Business and BearingPoint China GDC (the “Auction”). The Auction was held on May 27, 2009 and concluded on May 28, 2009. At a hearing on May 28, 2009, the Bankruptcy Court approved PwC as the winning bidder at the Auction. Under the terms of the winning bid, the aggregate purchase price for the PwC Commercial Services Transaction to be paid by PwC is approximately $44 million (subject to certain contractual adjustments). The closing of the PwC Commercial Services Transaction is expected to occur by the end of June 2009 and is subject to customary closing conditions.

     On April 20, 2009, the Board of Directors of the Company authorized the Company to enter into a non-binding term sheet for the sale of its EMEA business to local management. Additionally, the Company is in negotiations with other parties and local management to sell its Latin America practices and sell various Asia Pacific practices other than BearingPoint Japan and BearingPoint China GDC and is in various stages of negotiations to sell certain remaining assets that were not, or will not be, sold pursuant to other transactions. These potential transactions, together with the Deloitte Transaction, the PwC Japan Transaction and the PwC Commercial Services Transaction, are referred to collectively as the “Sale Transactions.”

     The purpose of these Sale Transactions is to sell all or substantially all of our business and assets to third parties or local management. Although certain of the Sale Transactions must be approved by the Bankruptcy Court and the Sale Transactions are subject to a number of risks, we expect that the Plan will be modified to reflect the Sale Transactions and that the Chapter 11 Cases will result in a liquidation of BearingPoint’s business and assets under either chapter 11 or chapter 7 of the Bankruptcy Code, such that BearingPoint will cease to operate as a going concern. There can be no assurance that the Sale Transactions will be completed.

     Operating in bankruptcy imposes significant risks and uncertainties on our business. See Item 1A — “Risk Factors — Risks Relating to Bankruptcy” for a discussion of the risks and uncertainties relating to our business and investing in our securities as a result of the Chapter 11 Cases.

     Additional information about our Chapter 11 Cases is available on our website www.bearingpoint.com and can be found by clicking on “Restructuring Information.”  Our internet website and the information contained or incorporated therein are not intended to be incorporated into this Annual Report. 

     Going Concern

     As discussed above, we expect that the Plan will be modified to reflect the Sale Transactions and that the Chapter 11 Cases will result in a liquidation of our business and assets under either chapter 11 or chapter 7 of the Bankruptcy Code, with the Debtors ceasing to operate as a going concern. In addition, Ernst & Young LLP’s report on the Company’s 2008 consolidated financial statements states that uncertainties inherent in the bankruptcy process raise substantial doubt about the Company’s ability to continue as a going concern.

     Economic and Industry Factors

     We believe that our clients’ spending for consulting services is partially correlated to, among other factors, the performance of the domestic and global economy as measured by a variety of indicators such as gross domestic product, government policies, mergers and acquisitions activity, corporate earnings, U.S. Federal and state government budget levels, inflation and interest rates and client confidence levels, among others.

     Historically, as economic uncertainties increase, clients’ interests in business and technology consulting have turned more to improving existing processes and reducing costs rather than investing in new innovations. Demand for our services, as evidenced by new contract bookings, also does not uniformly follow changes in economic cycles. Consequently, we may experience rapid decreases in new contract bookings at the onset of significant economic downturns while the benefits of economic recovery may take longer to realize. Generally, during time of economic uncertainty, our business plan places significant emphasis on continuing cost reduction and consolidation efforts, monitoring utilization rates, and making conservative estimates of minimal to no revenue growth. Nonetheless, most bookings are subject to cancellation on short notice and we may be unable to rapidly and effectively adjust our cost structure if we experience significant cancellations or deferrals of work.

     The markets in which we provide services are increasingly competitive and global in nature. While supply and demand in certain lines of business and geographies may support price increases for some of our standard service offerings from time to time, to maintain and improve our profitability we must constantly seek to improve and expand our unique service offerings and deliver our services at increasingly lower cost levels. Our Public Services industry group, which was our largest, also must operate within the U.S. Federal, state and local government markets where unique contracting, budgetary and regulatory regimes control how contracts are awarded, modified and terminated. Budgetary constraints or reductions in government funding may result in the modification or termination of long-term government contracts, which dramatically affect that business.

     Revenue and Income Drivers

     We derive substantially all of our revenue from professional services activities. Our revenue is driven by our ability to continuously generate new opportunities to serve clients, by the prices we obtain for our service offerings, and by the size and utilization of our professional workforce. Our ability to generate new business is directly influenced by the economic conditions in the industries and regions we serve, our anticipation and response to technological change, the type and level of technology spending by our clients and by our clients’ perception of the quality of our work. Our ability to generate new business is also indirectly and increasingly influenced by our clients’ perceptions of our ability to manage our ongoing issues surrounding our financial position.

     Our gross profit consists of revenue less our costs of service. The primary components of our costs of service include professional compensation and other direct contract expenses. Professional compensation consists of payroll costs and related benefits associated with client service professional staff (including bonuses, the vesting of various stock awards, tax equalization for employees on foreign and long-term domestic assignments and costs associated with reductions in workforce). Other direct contract expenses include costs directly attributable to client engagements. These costs include out-of-pocket costs such as travel and subsistence for client service professional staff, costs of hardware and software, and costs of subcontractors. If we are unable to adequately control or estimate these costs, or properly anticipate the sizes of our client service and support staff, our profitability suffers.

     Our operating profit reflects our revenue less costs of service and certain additional items that include, primarily, SG&A expenses, which include costs related to marketing, information systems, depreciation and amortization, finance and accounting, human resources, sales force, and other expenses related to managing and growing our business. Write-downs in the carrying value of goodwill and amortization of intangible assets have also reduced our operating profit.

     Our operating cash flow is derived predominantly from gross operating profit and how we manage our receivables and payables.

     Key Performance Indicators

     In evaluating our operating performance and financial condition, we focus on the following key performance indicators: bookings, revenue growth, gross margin (gross profit as a percentage of revenue), utilization, days sales outstanding, free cash flow and attrition.

	•		Bookings. We believe that information regarding our new contract bookings provides useful trend information regarding how the volume of our new business changes over time. Comparing the amount of new contract bookings and revenue provides us with an additional measure of the short-term sustainability of revenue growth. Information regarding our new bookings should not be compared to, or substituted for, an analysis of our revenue over time. There are no third-party standards or requirements governing the calculation of bookings. New contract bookings are recorded using then existing currency exchange rates and are not subsequently adjusted for currency fluctuations. These amounts represent our estimate at contract signing of the net revenue expected over the term of that contract and involve estimates and judgments regarding new contracts as well as renewals, extensions and additions to existing contracts. Subsequent cancellations, extensions and other matters may affect the amount of bookings previously reported; however, we do not revise previously reported bookings. Bookings do not include potential revenue that could be earned from a client relationship as a result of future expansion of service offerings to that client, nor does it reflect option years under contracts that are subject to client discretion. We do not record unfunded U.S. Federal contracts as new contract bookings while appropriation approvals remain pending, as there can be no assurances that these approvals will be forthcoming in the near future, if at all. Consequently, there can be significant differences between the time of contract signing and new contract booking recognition. Our level of bookings provides an indication of how our business is performing: a positive variance between bookings and revenue is indicative of business momentum, a negative variance is indicative of a business downturn. Nonetheless, we do not characterize our bookings, or our engagement contracts associated with new bookings, as backlog because our engagements generally can be cancelled or terminated on short notice or without notice.
	•		Revenue Growth. Unlike bookings, which provide only a general sense of future expectations, period-over-period comparisons of revenue provide a meaningful depiction of how successful we have been in growing our business over time.
			We believe that it is also useful to monitor net revenue, as well as revenue growth. Net revenue represents the actual amount paid by our clients for the services we provide, as opposed to services provided by others and ancillary costs and expenses. Net revenue is a non-GAAP financial measure. The most directly comparable financial measure in accordance with generally accepted accounting principles in the United States of America (“GAAP”) is revenue. Net revenue is derived by reducing the components of revenue that consist of other direct contract expenses, which are costs that are directly attributable to client engagements. These costs include items such as computer hardware and software, travel expenses for professional personnel and costs associated with subcontractors.
	•		Gross Margin (gross profit as a percentage of revenue). Gross margin is a meaningful tool for monitoring our ability to control our costs of service. Analysis of the various cost elements, including professional compensation expense, effects of foreign exchange rate changes and the use of subcontractors, as a percentage of revenue over time can provide additional information as to the key challenges we are facing in our business. The cost of subcontractors is generally more expensive than the cost of our own workforce and can negatively impact our gross profit. While the use of subcontractors can help us to win larger, more complex deals, and also may be mandated by our clients, we focus on limiting the use of subcontractors whenever possible in order to minimize our costs. We also utilize certain adjusted gross margin metrics in connection with the vesting and settlement of certain employee incentive awards. For a discussion of these metrics, see Item 11, “Executive Compensation — Compensation Discussion and Analysis.”
			We also monitor “contribution margin” to better review the profitability of our respective operating segments. Contribution margin is a non-GAAP financial measure. The most directly comparable financial measure in accordance with GAAP is gross margin. Contribution margin is calculated by subtracting, from net revenue, professional compensation, other costs of service, SG&A and certain other allocations, and then dividing by net revenue.
	•		Utilization. Utilization represents the percentage of time our consultants are performing work, and is defined as total hours charged to client engagements or to non-chargeable client-relationship projects divided by total available hours for any specific time period, net of holiday and paid vacation hours.

	•		Days Sales Outstanding (“DSO”). DSO is an operational metric that approximates the amount of earned revenue that remains unpaid by clients at a given time. DSOs are derived by dividing the sum of our outstanding accounts receivable and unbilled revenue, less deferred revenue, by our average net revenue per day. “Average net revenue per day” is determined by dividing total net revenue for the most recently ended trailing twelve-month period by 365.
	•		Free Cash Flow. Free cash flow is calculated by subtracting purchases of property and equipment from cash provided by operating activities. We believe free cash flow is a useful measure because it allows better understanding and assessment of our ability to meet debt service requirements and the amount of recurring cash generated from operation after expenditures for fixed assets. Free cash flow does not represent our residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt. We use free cash flow as a measure of recurring operating cash flow. Free cash flow is a non-GAAP financial measure. The most directly comparable financial measure calculated in accordance with GAAP is net cash provided by operating activities.
	•		Attrition. Attrition, or voluntary total employee turnover, is calculated by dividing the number of our employees who have chosen to leave the Company within a certain period by the total average number of all employees during that same period. Our attrition statistic covers all of our employees, which we believe provides metrics that are more compatible with, and comparable to, those of our competitors.

     Readers should understand that each of the performance indicators identified above are utilized by many companies in our industry and by those who follow our industry. There are no uniform standards or requirements for computing these performance indicators, and, consequently, our computations of these amounts may not be comparable to those of our competitors.

Discussion of Certain 2008 Financial Results

     Our overall performance in 2008 was negatively impacted by the global economic downturn, coupled with continued concerns by our clients over our financial stability, particularly in light of the rights of the holders of our 5.00% Convertible Senior Debentures to demand payment of up to the entire principal amount of those debentures as early as April 2009 and potential acceleration of all amounts under our various debt instruments upon a delisting of our common stock from the NYSE.

     Of particular note in 2008 are the following:

	•		New contract bookings for 2008 were $2,710.6 million, a decrease from new contract bookings of $2,864.9 million for 2007.
	•		During the year ended December 31, 2008, an adjustment of $66.6 million and $10.6 million was recorded to reverse expenses recorded in 2007 associated with the PSU and PCA plans, respectively, due to the Company’s estimate of the performance conditions not being probable of achievement at the end of the plan period.
	•		Global tax equalization refers to our policy of estimating and recording expenses to ensure that our employees working on domestic long-term and foreign short-term assignments outside of their home tax jurisdiction will be subject to the same level of personal tax as their home tax jurisdiction. If the estimated tax equalization liability is determined to be greater or less than the amount due upon final settlement, the difference is recorded in the current period. During 2008, we reversed accruals of $37.0 million in connection with our global tax equalization policy, which resulted in our professional compensation expense being reduced by this amount.
	•		During 2008, we implemented numerous new controls in our efforts toward remediating our material weaknesses in internal control over financial reporting. One material weakness remains (see Item 9A of this Annual Report).
	•		As of January 1, 2009, we combined three of our business segments: Commercial Services, Financial Services, and Latin America and began managing the operations of these three segments as one combined segment reporting to a single segment leader, and began realigning resources and internal management in order to gain synergies in both costs and revenue.
	•		Utilization for 2008 was 78.9%, compared with 77.2% in 2007.
	•		As of December 31, 2008, our DSOs stood at 66 days, representing a decrease of 11 days, or 14.3%, from our DSOs at December 31, 2007 of 77 days.

	•		Free cash flow for 2008 and 2007 was ($112.1) million and ($231.5) million, respectively. Net cash used in operating activities in 2008 and 2007 was ($63.9) million and ($193.3) million, respectively. Purchases of property and equipment in 2008 and 2007 were $48.2 million and $38.2 million, respectively.
	•		During 2008, we spent approximately $39.9 million in connection with the implementation of our new North American financial reporting system, of which $15.6 million was expensed and $24.3 million was capitalized, including $2.1 million of interest costs. We finalized decisions regarding the design of, and obtained licenses for the components needed to substantially replace, our existing North American financial reporting systems. This implementation has been suspended due to the Company’s Sale Transactions.
	•		As of December 31, 2008, we had approximately 15,200 full-time employees, including approximately 12,700 consulting professionals, which represented a decrease in billable headcount of approximately 11.8% from full-time employees and consulting professionals at December 31, 2007 of 17,100 and 14,400, respectively.
	•		Our voluntary, annualized attrition rate for 2008 was 24.8%, compared to 24.7% for 2007.
	•		In 2008, we paid performance-based cash bonuses totaling approximately $30.7 million ($17.2 million to staff and $13.5 million to managing directors), based on 2007 performance. As of December 31, 2008, we had accrued performance-based cash bonuses totaling approximately $19.6 million based on 2008 performance, however, as a result of our bankruptcy and Sale Transactions, we currently do not anticipate paying this full amount.
	•		In April 2009, the U.S. Defense Contract Audit Agency (“DCAA”) issued a report on its audit of our financial capability, which concluded that our financial condition is unfavorable for performing government contracts due to our filing for bankruptcy. However, we are still eligible to continue to receive contract awards of all types from the U.S. Federal government. The DCAA examined our financial condition and capability and determined we may not have adequate financial resources to perform government contracts in the current and near-term (up to one year) without extraordinary management actions.
	•		At the annual meeting of stockholders, held on December 5, 2008, the Board approved the implementation of a one-for-fifty reverse stock split of the Company’s common stock.  The record and effective date for the reverse stock split was December 10, 2008.  As of the record date, the Company had 220,851,816 shares of common stock outstanding and upon the effectiveness of the reverse stock split, the Company had 4,417,036 shares of common stock outstanding.  The reverse stock split had no effect on the number of authorized shares of common stock.

Segments

     Our reportable segments for 2008 consist of our three North America Industry Groups (Public Services, Commercial Services and Financial Services), our three international regions (EMEA, Asia Pacific and Latin America) and the Corporate/Other category (which consists primarily of infrastructure costs). Revenue and gross profit information about our segments are presented below, starting with each of our industry groups and then with each of our three international regions (in order of size).

     Our chief operating decision maker, the Chief Executive Officer, evaluates performance and allocates resources among the segments. Accounting policies of our segments are the same as those described in Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements. Upon consolidation, all intercompany accounts and transactions are eliminated. Inter-segment revenue is not included in the measure of profit or loss for each reportable segment. Performance of the segments is evaluated on operating income excluding the costs of infrastructure functions (such as information systems, finance and accounting, human resources, legal and marketing) as described in Note 18, “Segment Information,” of the Notes to Consolidated Financial Statements.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

     Revenue. Our revenue for 2008 was $3,197.0 million, a decrease of $258.5 million, or 7.5%, compared to 2007 revenue of $3,455.6 million. Dampening the impact of revenue declines in 2008 was $87.4 million of favorable impact of the strengthening of foreign currencies, particularly the Euro, the Japanese Yen, and the Brazilian Real, against the U.S. dollar. The following tables present certain revenue information and performance metrics for each of our reportable segments during 2008 and 2007. Amounts are in thousands, except percentages. For additional geographical revenue information, please see Note 18, “Segment Information,” of the Notes to Consolidated Financial Statements.

															Percent				Percent
		Year Ended													Increase				Increase
		December 31,													(Decrease)				(Decrease)
		2008				2007				US$ Change					US$				Local Currency
Revenue
Public Services		$	1,368,992			$	1,432,645			$	(63,653	)			(4.4	%)			(4.4	%)
Commercial Services			386,599				509,789				(123,190	)			(24.2	%)			(24.2	%)
Financial Services			185,978				264,198				(78,220	)			(29.6	%)			(29.6	%)
EMEA			833,520				791,298				42,222				5.3	%			(1.2	%)
Asia Pacific			324,047				362,715				(38,668	)			(10.7	%)			(18.3	%)
Latin America			101,361				90,091				11,270				12.5	%			5.8	%
Corporate/Other			(3,456	)			4,826				(8,282	)			n/m				n/m
Total		$	3,197,041			$	3,455,562			$	(258,521	)			(7.5	%)			(10.0	%)

	•		Public Services revenue decreased in 2008 due to declines in the SLED, Healthcare, and Emerging Markets sectors, partially offset by increases in the Civilian and Defense sectors. The declines in the SLED, Healthcare, and Emerging Markets sectors were primarily due to a reduced demand for services. Additionally SLED was negatively impacted by reductions in revenue due to performance issues on certain SLED contracts, and declines in Emerging Markets sector were the result of our decision to exit certain locations due to security concerns. Revenue growth in the Civilian sector was due to increased activity with existing clients as well as increases in billing rates for our services. Revenue growth in the Defense sector was due to increased demand for our services, and the recognition of $7.7 million in revenue during the first quarter of 2008 relating to work performed in earlier periods for which contract contingencies were resolved in the current period.
	•		Commercial Services revenue decreased significantly in 2008 due to declines in all sectors. Revenue decreases were attributable to reduced demand for our services and reductions in the effective rates charged for our services.
	•		Financial Services revenue decreased significantly in 2008 due to revenue decreases in the Banking, Services and Global Markets sectors, slightly offset by revenue increases in the Insurance sector. Revenue decreases were attributable, in part, to lower levels of contract signings since the fourth quarter of 2007. These decreases were due to a combination of factors, including reduced demand for our services, and our devoting significant efforts during the first quarter of 2008 to reducing headcount and stabilizing our business model, as many clients deferred new initiatives in the wake of the crisis in the financial markets and became increasingly sensitive to negative perceptions regarding our financial stability. These revenue declines were only slightly offset by increased revenue in the Insurance sector driven by additional efforts on a small number of large client engagements.
	•		EMEA revenue increased during 2008 primarily as a result of the favorable impact of the strengthening of foreign currencies, specifically the Euro, against the U.S. dollar. The currency impact further enhanced meaningful revenue growth in Germany and France, and partially offset the effects of revenue decreases in the United Kingdom, Spain, Sweden and Norway. The increase in revenues in Germany and France resulted from both increased billing rates and increased demand for our services. Revenues in Spain continue to decline as a result of our strategic decision to significantly reduce our activities in this country. The revenues in the United Kingdom, Sweden and Norway declined due to the loss of key personnel in the early part of 2008 in these countries.
	•		Asia Pacific revenue decreased during 2008 primarily as a result of revenue declines in Australia, and New Zealand. These revenue declines were offset by the favorable impact of the strengthening of the Japanese yen against the U.S. dollar. The

			favorable impact of the strengthening yen fully offset revenue declines in local currency in Japan, resulting in marginal revenue growth in U.S. dollars. In Australia, we experienced significant attrition and lost a number of key employees, in early 2008, which led to a substantial reduction in our business and lower revenues in 2008. Revenues in Australia were also adversely impacted by the transitioning of work on a large systems implementation contract with a telecommunication client in the support phase. In Japan the decline in revenue in local currency was due largely to the impact of fewer projects related to J-SOX and the decline in rates billed for our work on a particularly large systems implementation contract. In addition, our decision to reduce our presence in New Zealand in late 2007 resulted in significantly less revenue year over year. All countries in the region were significantly impacted by the current economic slowdown, which resulted in reduced bookings and revenue.
	•		Latin America revenue increased in 2008 primarily as a result of revenue increases in Brazil and Costa Rica, as well as the favorable impact of the strengthening of the Brazilian Real against the U.S. dollar. These increases were only partially offset by revenue declines in Mexico.
	•		Corporate/Other: Our Corporate/Other segment does not contribute significantly to our revenue.

     Gross Profit. During 2008, our revenue decreased $258.5 million and total costs of service decreased $469.3 million when compared to 2007, resulting in an increase in gross profit of $210.8 million, or 45.0%. Gross profit as a percentage of revenue increased to 21.2% for 2008 from 13.6% for 2007. Contributing to the increase in gross profit was $22.3 million as a result of the favorable impact of the strengthening of foreign currencies, primarily the Euro, the Japanese Yen, and Brazilian Real, against the U.S. dollar. The change in gross profit for 2008 compared to 2007 resulted primarily from the following:

	•		Professional compensation expense decreased as a percentage of revenue to 48.9% for 2008, compared to 53.8% for 2007. We experienced a net decrease in professional compensation expense of $294.2 million, or 15.8%, to $1,564.2 million for 2008 over $1,858.5 million for 2007. The decrease in professional compensation was primarily due to reductions in headcount in every segment, the reversal of $62.7 million of expenses recorded in 2007 associated with the performance share unit (“PSU”) and performance cash award (“PCA”) plans due to the Company’s estimate of the performance condition not being probable of achievement at the end of the plan period, a $37.0 million adjustment related to the reversal of accruals in connection with our global tax equalization and a decline in cost of service bonus expense of $37.9 million. Dampening the declines in professional compensation was the unfavorable impact of $44.6 million as a result of the strengthening of foreign currencies against the U.S. dollar.
	•		Other direct contract expenses decreased as a percentage of revenue to 21.1% for 2008 compared to 23.4% for 2007. We experienced a net decrease in other direct contract expenses of $133.1 million, or 16.5%, to $674.6 million for 2008 from $807.7 million for 2007. The decrease was driven primarily by reduced subcontractor expenses as a result of increased use of our internal resources coupled with a decline in the volume of work. Dampening the declines of other direct contract expenses was the unfavorable impact of $13.9 million as a result of the strengthening of foreign currencies against the U.S. dollar.
	•		Other costs of service as a percentage of revenue increased slightly to 8.8% for 2008 from 8.7% for 2007. We experienced a net decrease in other costs of service of $17.6 million, or 5.9%, to $282.4 million for 2008 from $300.0 million for 2007. The decrease was primarily due to a decline in depreciation and amortization expense of $11.3 million, a decline in rent and facilities related expenses of $7.8 million, and a decline in bad debt expense of $3.8 million. Partially offsetting the declines in other cost of service was $11.5 million of expense associated with the settlement of a contract dispute with one particular Public Services client. Additionally, dampening the declines in other cost of service was the unfavorable impact of $6.6 million as a result of the strengthening of foreign currencies against the U.S. dollar.
	•		In 2008 we recorded, within the Corporate/Other operating segment, a credit of $3.5 million for lease and facilities restructuring costs, compared to a $20.9 million charge for lease and facilities restructuring costs in 2007. These costs for 2008 related primarily to the fair value of future lease obligations associated with office space, primarily within the EMEA and North America regions, which we no longer use.

     Gross Profit by Segment. The following tables present certain gross profit and margin information and performance metrics for each of our reportable segments for years 2008 and 2007 Amounts are in thousands, except percentages.

															Percent				Percent
		Year Ended													Increase				Increase
		December 31,													(Decrease)				(Decrease)
		2008				2007				US$ Change					US$				Local Currency
Gross Profit
Public Services		$	328,794			$	263,431			$	65,363				24.8	%			24.8	%
Commercial Services			85,736				81,656				4,080				5.0	%			5.0	%
Financial Services			47,766				41,627				6,139				14.7	%			14.7	%
EMEA			183,260				153,959				29,301				19.0	%			10.5	%
Asia Pacific			90,110				81,946				8,164				10.0	%			(0.4	%)
Latin America			17,433				(11,240	)			28,673				255.1	%			241.7	%
Corporate/Other			(73,788	)			(142,854	)			69,066				n/m				n/m
Total		$	679,311			$	468,525			$	210,786				45.0	%			40.2	%

		Year Ended December 31,
		2008				2007
Gross Profit as a Percentage of Revenue
Public Services			24.0	%			18.4	%
Commercial Services			22.2	%			16.0	%
Financial Services			25.7	%			15.8	%
EMEA			22.0	%			19.5	%
Asia Pacific			27.8	%			22.6	%
Latin America			17.2	%			(12.5	%)
Corporate/Other			n/m				n/m
Total			21.2	%			13.6	%

     Changes in gross profit by segment were as follows:

	•		Public Services gross profit increased in 2008 despite the decline in revenue, primarily due to the significant reductions in other direct contract expense and professional compensation. These cost savings were primarily due to decreases in subcontractor expenses, the reversal of compensation expense associated with our PSU and PCA plans as discussed above, and the reversal of costs associated with global tax equalization. Though revenue declined during 2008, gross profit was positively impacted by the recognition of $7.7 million in revenue during the first quarter of 2008 relating to work performed in earlier periods for which contract contingencies were resolved in the current period. Gross profit improvements were also attributable to improved results in the Defense and Civilian sectors. The improvements were substantially offset with declines in the SLED and Emerging Markets sectors due to revenue declines coupled with an increase in costs associated with one large loss contract in the SLED sector.
	•		Commercial Services gross profit increased in 2008 as the impact of significant revenue declines in most sectors was more than offset by significant reductions in professional compensation, and, to a lesser extent, reductions in other direct contract expenses. The reduction in professional compensation was due primarily to the effects of continuing headcount reductions, including reductions among additional internal personnel allocated to this segment, the reversal of compensation expense associated with our PSU and PCA plans as discussed above, and the reversal of costs associated with global tax equalization.
	•		Financial Services gross profit increased slightly in 2008 as the impact of significant revenue decreases were offset by significant decreases in professional compensation, and, to a lesser extent, reductions in other direct contract expenses and other cost of service. The reduction in professional compensation was due primarily to the reversal of compensation expense associated with our PSU and PCA plans discussed above, and, to a lesser extent, accrual reversals for costs associated with global tax equalization recorded during the year, as well as the effects of continuing headcount reductions in response to declining demand for our services.

	•		EMEA gross profit increased in 2008 due to the favorable impact of the strengthening of the Euro against the U.S. dollar, as well as increased profitability, primarily in Germany and France. These increases in profitability were driven by increases in revenue coupled with decreases in professional compensation and other costs of services as a result of cost reduction efforts executed throughout the year. Additionally other cost of service also declined due to an asset impairment recorded in 2007 without any corresponding impairment recorded in 2008.
	•		Asia Pacific gross profit increased in 2008 due primarily to the favorable impact of the strengthening of foreign currencies against the U.S. dollar, particularly the Japanese yen. Significant declines in revenue, particularly in Australia, Japan, and New Zealand were substantially offset by lower professional compensation and other direct contract expenses. These declines in cost of service were in response to the lower volume of work in the region due to the significant reduction in staffing levels in Australia and New Zealand, a slowing economy, as well as lower use of sub-contracted labor in Japan and a reduction in cost accruals related to loss contracts.
	•		Latin America gross profit increased in 2008 due to increases in revenue as well as reductions in professional compensation.
	•		Corporate/Other contains rent and facilities expenses not specifically allocated to one of the reportable segments, as well as the residual expenses of our Global Delivery Centers (“GDC’s”) and other cross industry technology resources, which are charged out to our reportable segments as they are utilized on customer facing engagements. In 2008, we experienced declines in lease and facilities charges of $38.0 million, as well as $22.4 million of lower residual expenses for our GDC’s as a result of the change in the method we utilize to cross charge the costs associated with these personnel to the other segments. While the declines in lease and facilities related charges contributed to consolidated growth in gross profit, the lower residual expenses associated with our GDC’s would have been absorbed within the other segments and would not contribute to growth in consolidated gross profit.

     Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $150.5 million, or 21.5%, to $550.8 million for 2008 from $701.3 million for 2007. Selling, general and administrative expenses as a percentage of gross revenue decreased to 17.2% for 2008 from 20.3% for 2007. The decrease was primarily due to reduced costs directly related to the closing of our financial statements, primarily related to subcontracted labor, as well as savings from the reduction in the size of our sales force. In addition, significant declines were due to a reduction in stock compensation expenses and bonus expenses totaling $14.5 million related to the reversal of expense associated with our PSU and PCA plans as discussed above, and savings in marketing expense in response to the current economic conditions.

     Interest Income. Interest income was $7.4 million and $12.1 million in 2008 and 2007, respectively. Interest income is earned primarily from cash and cash equivalents, including money-market investments. The decline in interest income was due to lower levels of cash invested during 2008, as well as declines in market rates on those investments during the year.

     Interest Expense. Interest expense was $61.0 million and $61.2 million in 2008 and 2007, respectively. Interest expense is attributable to our debt obligations, consisting of interest due along with amortization of loan costs and loan discounts.

     Other Expense, net. Other expense, net, was $38.2 million and $8.6 million in 2008 and 2007, respectively. The balances in each period primarily consisted of foreign currency exchange gains and losses associated with the revaluation of our intercompany payables and receivables.

     Income Tax Expense. We incurred income tax expense of $68.8 million in 2008 and income tax expense of $72.2 million in 2007. The principle reasons for the differences between the effective income tax rate on loss from continuing operations of 187.4% and (24.9)% for 2008 and 2007, respectively, and the U.S. Federal statutory income tax rate were: nondeductible meals and entertainment expense of $19.0 million and $19.0 million; changes to deferred tax asset valuation allowance of $(12.7) million and $125.6 million; state and local income taxes of $1.7 million and $(12.4) million; foreign recapitalization and restructuring of $24.7 million and $17.3 million; foreign taxes of $11.0 million and $17.4 million; tax on unremitted foreign earnings of $22.1 million and $0; prior year tax refund claims of $(5.6) million and $0: income tax reserves of $(1.9) million and $12.5 million; non-deductible intercompany charges and interest of $7.5 million and $7.8 million; foreign dividend income of $7.0 million and $1.0 million; and other non-deductible items of $(2.2) million and $17.4 million, respectively.

     Final determination of a significant portion of the Company’s tax liabilities that will effectively be settled remains subject to ongoing examination by various taxing authorities, including the Internal Revenue Service. We are actively pursuing strategies to

favorably settle or resolve these liabilities for unrecognized tax benefits. If we are successful in mitigating these liabilities, in whole or in part, the majority of the impact will be recorded as an adjustment to income tax expense in the period of settlement.

     In 2008, we realized a net loss of $32.1 million, or a loss of $7.18 per share, representing a decrease of $330.7 million over a net loss of $362.7 million, or a loss of $83.90 per share in 2007. This change in net loss was primarily attributable to:

	•		An increase in gross profit of $210.8 million in 2008;
	•		A decrease in selling, general and administrative expenses of $150.5 million in 2008; and offset by
	•		An increase in other expense of $29.6 million in 2008 due to foreign currency exchange losses associated with the revaluation of our intercompany payables and receivables.

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

     Revenue. Our revenue for 2007 was $3,455.6 million, an increase of $11.6 million, or 0.3%, over 2006 revenue of $3,444.0 million. The following tables present certain revenue information and performance metrics for each of our reportable segments during 2007 and 2006. Amounts are in thousands, except percentages. For additional geographical revenue information, please see Note 18, “Segment Information,” of the Notes to Consolidated Financial Statements.

		Year Ended December 31,
		2007				2006				$ Change					% Change
Revenue
Public Services		$	1,432,645			$	1,339,358			$	93,287				7.0	%
Commercial Services			509,789				554,806				(45,017	)			(8.1	)%
Financial Services			264,198				399,331				(135,133	)			(33.8	)%
EMEA			791,298				703,083				88,215				12.5	%
Asia Pacific			362,715				360,001				2,714				0.8	%
Latin America			90,091				82,319				7,772				9.4	%
Corporate/Other			4,826				5,105				(279	)			n/m
Total		$	3,455,562			$	3,444,003			$	11,559				0.3	%

		Impact of				Revenue growth
		currency				(decline), net of
		fluctuations				currency impact				Total
Revenue
Public Services			0.0	%			7.0	%			7.0	%
Commercial Services			0.0	%			(8.1	)%			(8.1	)%
Financial Services			0.0	%			(33.8	)%			(33.8	)%
EMEA			9.4	%			3.1	%			12.5	%
Asia Pacific			1.7	%			(0.9	)%			0.8	%
Latin America			9.5	%			(0.1	)%			9.4	%
Corporate/Other			n/m				n/m				n/m
Total			2.3	%			(2.0	)%			0.3	%

	•		Public Services revenue increased in 2007 due to significant revenue growth in our Emerging Markets, SLED and Civilian sectors. Revenue growth within these sectors was partially derived from expected increases in work on several large existing multi-year contracts signed in prior years. Revenue in our Defense sector declined somewhat, due to congressional decisions regarding ongoing funding by the U.S. government of the continuing war on terrorism and combat operations in Iraq and Afghanistan, as well as increased budgetary pressures on U.S. defense spending. The non-governmental portion of our Healthcare sector also experienced revenue declines.
	•		Commercial Services revenue decreased in 2007. While we experienced significant revenue growth in our Energy sector as client demand for the Company’s industry-specific solutions increased, overall, revenue decreased due to declines in the

			Communications and Media, High Technology and Manufacturing sectors. These declines were due, in part, to decreased business levels caused by consolidation within the telecommunications industry and disputes with two significant telecommunications clients in that sector.
	•		Financial Services revenue decreased in 2007 due to significant revenue declines across all of its industry sectors. Revenue decreases were attributable to several factors, including the winding down of the segment’s largest client engagement during 2007. The continuing effects of losses of senior staff in certain of our higher rate business sectors also attributed to revenue declines in 2007. In addition, difficulties in securing long-term client commitments and delays by clients in implementing new initiatives given the recently reported industry-wide losses related to asset write-downs all had a negative effect on revenue on a year-over-year basis.
	•		EMEA revenue increased in 2007, primarily as a result of the favorable impact of the strengthening of foreign currencies, primarily the Euro, against the U.S. dollar, but also due to significant revenue increases in France, Russia and Switzerland. Revenue growth in France was due to an expanding systems implementation practice while revenue growth in Russia and Switzerland was generally attributable to increased demand for our consulting services in those markets. These increases were partially offset by revenue declines in Spain and the United Kingdom. Revenue in the United Kingdom declined due to the reduction in the volume of work provided to multi-national clients in 2007, and the decline in revenue in Spain was attributable to our strategic decision to reduce our activities in this country.
	•		Asia Pacific revenue increased in 2007, primarily as a result of the favorable impact of the strengthening of foreign currencies against the U.S. dollar. Significant revenue growth was achieved in Japan and to a lesser extent in China. These increases continue to be offset by lower revenue in Australia, Korea and New Zealand. Japanese revenue increased due to continued revenue growth from systems implementation contracts and projects involving compliance with Japan’s Financial Instruments and Exchange Law. This growth began in 2006 and has continued throughout 2007. China revenue increased as a result of significant new contracts signed with several large multi-national clients in 2007. Lower revenue in Australia and New Zealand resulted from the winding down or completion of several significant client engagements and partially due to deteriorating market conditions.
	•		Latin America revenue increased in 2007, with Brazil and Mexico contributing equally to the growth in U.S. dollars. The favorable impact of the strengthening of the Brazilian Real against the U.S. dollar served to offset local currency revenue declines in Brazil.
	•		Corporate/Other: Our Corporate/Other segment does not contribute significantly to our revenue.

     Gross Profit. During 2007, our revenue increased $11.6 million and total costs of service increased $93.6 million when compared to 2006, resulting in a decrease in gross profit of $82.0 million, or 14.9%. Gross profit as a percentage of revenue decreased to 13.6% for 2007 from 16.0% for 2006. The change in gross profit for 2007 compared to 2006 resulted primarily from the following:

	•		Professional compensation expense increased as a percentage of revenue to 53.8% for 2007, compared to 50.1% for 2006. We experienced a net increase in professional compensation expense of $133.0 million, or 7.7%, to $1,858.5 million for 2007 over $1,725.5 million for 2006. The increase in professional compensation was primarily due to merit-based annual salary increases, increases in stock-based compensation expense for PSUs, RSUs and, to a lesser extent, cash bonuses.
	•		Other direct contract expenses decreased as a percentage of revenue to 23.4% for 2007 compared to 25.8% for 2006. We experienced a net decrease in other direct contract expenses of $80.4 million, or 9.1%, to $807.7 million for 2007 from $888.2 million for 2006. The decrease was driven primarily by reduced subcontractor expenses as a result of increased use of our internal resources. In addition, the decline was driven by higher other direct contract expenses recorded in the first quarter of 2006 related to the HT Contract.
	•		Other costs of service as a percentage of revenue increased to 8.7% for 2007 from 7.3% for 2006. We experienced a net increase in other costs of service of $49.8 million, or 19.9%, to $300.0 million for 2007 from $250.2 million for 2006. The increase was primarily due to an increase in non-billable employees over the prior year, due in part to the redeployment of existing employees from client-facing roles to practice support roles, which resulted in related salaries and expenses now being reflected in other costs of service rather than professional compensation expense.

•

In 2007 we recorded, within the Corporate/Other operating segment, a charge of $20.9 million for lease and facilities restructuring costs, compared to a $29.6 million charge for lease and facilities restructuring costs in 2006. These costs for 2007 related primarily to the fair value of future lease obligations associated with office space, primarily within the EMEA and North America regions, which we will no longer be using.

     Gross Profit by Segment. The following tables present certain gross profit and margin information and performance metrics for each of our reportable segments for years 2007 and 2006. Amounts are in thousands, except percentages.

		Year Ended December 31,
		2007				2006				$ Change					% Change
Gross Profit
Public Services		$	263,431			$	263,841			$	(410	)			(0.2	)%
Commercial Services			81,656				81,419				237				0.3	%
Financial Services			41,627				135,187				(93,560	)			(69.2	)%
EMEA			153,959				129,523				24,436				18.9	%
Asia Pacific			81,946				80,448				1,498				1.9	%
Latin America			(11,240	)			9,058				(20,298	)			n/m
Corporate/Other			(142,854	)			(148,950	)			6,096				n/m
Total		$	468,525			$	550,526			$	(82,001	)			(14.9	)%

		Year Ended December 31,
		2007				2006
Gross Profit as a Percentage of Revenue
Public Services			18.4	%			19.7	%
Commercial Services			16.0	%			14.7	%
Financial Services			15.8	%			33.9	%
EMEA			19.5	%			18.4	%
Asia Pacific			22.6	%			22.3	%
Latin America			(12.5	)%			11.0	%
Corporate/Other			n/m				n/m
Total			13.6	%			16.0	%

     Changes in gross profit by segment were as follows:

	•		Public Services gross profit remained relatively unchanged in 2007. Significant year-over-year revenue increases were offset by a significant increase in professional compensation expense of $80.4 million, or 13.5%, over 2006, and additional costs and revenue write-downs of approximately $15 million were taken on two of our SLED sector contracts. The increase in professional compensation expense was associated with the hiring of additional personnel needed to meet the demand for our services, as well as bonus payments and accruals, and increases in stock-based compensation expense.
	•		Commercial Services gross profit remained relatively unchanged in 2007, with declines in subcontractor expenses, professional compensation and reimbursable client expenses being partially offset by reductions in revenue and contract losses. In 2006, Commercial Services gross profit was negatively impacted by losses of approximately $86.2 million attributable to settlements reached with two telecommunications clients, as compared to losses of approximately $16.7 million in 2007, primarily in connection with a single Communications and Media sector project.
	•		Financial Services gross profit significantly decreased in 2007, primarily due to significantly lower revenue combined with a decline in higher margin engagements in the total mix of engagements. Declines in revenue were partially offset by declines in compensation expense, reimbursable client expenses and subcontractor expenses. These declines in costs of services were at a slower pace than the declines in revenue, resulting in lower gross profits in 2007 as compared to 2006.
	•		EMEA gross profit increased in 2007, primarily due to overall higher revenue in the EMEA region as well as improved profitability in Germany, France and Switzerland as a result of higher utilization and lower costs. This increase was partially

			offset by an increase in professional compensation due to a larger number of additional personnel to meet the demand for our services and, to a lesser extent, an increase in other costs of services. The increases in professional compensation and other costs of services were partially offset by decreases in costs associated with subcontractors due largely to our effort to increase the use of internal resources.
	•		Asia Pacific gross profit increased in 2007, due to increased revenue and improvements in profitability and staff utilization in our Japanese business. In addition, positive growth in gross profit in the region was realized from decreases in other direct contract expenses as a result of decreased subcontractor usage in Japan, which were substantially offset by higher professional compensation costs as well as increased contract loss reserves of $12.1 million recorded during 2007 as compared to 2006.
	•		Latin America gross profit decreased in 2007, due to significant increases in compensation expense, other direct contract expenses and contract write-offs. These increases were driven by an increase in employee compensation recognized as a result of statutory overtime regulations and other employee benefits in Brazil, and to a lesser extent by increased subcontractor expenses in Mexico.
	•		Corporate/Other consists primarily of rent expense and other facilities related charges.

     Amortization of Purchased Intangible Assets. We did not incur any amortization expense in 2007 as our intangible assets were fully amortized. Amortization of purchased intangible assets was $1.5 million in 2006.

     Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $46.9 million, or 6.3%, to $701.3 million for 2007 from $748.3 million for 2006. Selling, general and administrative expenses as a percentage of gross revenue decreased to 20.3% for 2007 from 21.7% for 2006. The decrease was primarily due to reduced costs directly related to the closing of our financial statements, primarily subcontracted labor, as well as savings from the reduction in the size of our sales force. Partially offsetting these savings was increased compensation expense for additional SG&A personnel, additional recruiting costs incurred and stock-based compensation expense related to RSUs and PSUs.

     Interest Income. Interest income was $12.1 million and $8.7 million in 2007 and 2006, respectively. Interest income is earned primarily from cash and cash equivalents, including money-market investments. The increase in interest income was due to a higher level of cash invested in money markets during 2007.

     Interest Expense. Interest expense was $61.2 million and $37.2 million in 2007 and 2006, respectively. Interest expense is attributable to our debt obligations, consisting of interest due along with amortization of loan costs and loan discounts. The increase in interest expense was due to interest attributable to our 2007 Credit Facility, the acceleration of debt issuance costs resulting from the termination of the 2005 Credit Facility, and, to a lesser extent, higher interest rates on our debt obligations.

     Insurance Settlement. During 2006, related to the Settlement Agreement with HT, we recorded $38.0 million for an insurance settlement. For additional information, see Note 11, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements.

     Other (Expense) Income, net. Other expense, net, was $8.6 million in 2007, and other income, net, was $8.7 million in 2006. The balances in each period primarily consisted of foreign currency exchange gains and losses.

     Income Tax Expense. We incurred income tax expense of $72.2 million for the year ended December 31, 2007 and income tax expense of $32.4 million for the year ended December 31, 2006. The principle reasons for the differences between the effective income tax rate on loss from continuing operations of (24.9)% and (17.9)% for years ended December 31, 2007 and 2006, respectively, and the U.S. Federal statutory income tax rate were: nondeductible meals and entertainment expense of $19.0 million and $22.0 million; increases to deferred tax asset valuation allowance of $125.6 million and $76.8 million; state and local income taxes of $(12.4) million and $(6.7) million; foreign recapitalization and restructuring of $17.3 million and $5.4 million; foreign taxes of $17.4 million and $(3.8) million; income tax reserves of $12.5 million and $8.4 million; non-deductible interest of $7.8 million and $10.7 million; foreign dividend income of $1.0 million and $13.6 million; and other non-deductible items of $17.4 million and $10.0 million, respectively.

     Net Loss. For 2007, we incurred a net loss of $362.7 million, or a loss of $83.90 per share. Contributing to the net loss for 2007 were $60.1 million of bonus expense (which includes, among other things, $6.3 million related to 2006 performance bonuses,

$10.6 million related to the PCAs and $30.3 million expected to be paid in 2008 for 2007 performance), $97.1 million of non-cash compensation expense related to the vesting of stock-based awards, $20.9 million of lease and facilities restructuring charges, and the previously mentioned $83.5 million in external costs related to the preparation of our financial statements, our auditors’ review and audit of our financial statements and the testing of internal controls. For 2006, we incurred a net loss of $213.4 million, or a loss of $50.30 per share. Contributing to the net loss for 2006 were $48.2 million of losses related to the previously mentioned settlements with telecommunications clients, $57.4 million of bonus expense, $53.4 million of non-cash compensation expense related to the vesting of stock-based awards, $29.6 million of lease and facilities restructuring charges and the previously mentioned $33.6 million year over year increase in external costs related to the closing of our financial statements.

Obligations and Commitments

     As of December 31, 2008, we had the following obligations and commitments to make future payments under contracts, contractual obligations and commercial commitments. These obligations were affected by the Debtors filing voluntary petitions for relief under Chapter 11 of the Bankruptcy Code and therefore may not be paid in full as a result. Amounts are in thousands.

						Payments due by Period
						Less than												More than
		Total				1 year				1-3 years				3-5 years				5 years
Contractual Obligations
Short-term and long-term debt(1)			1,238,773				238,693				98,152				319,978				581,950
Operating leases			234,763				75,453				92,254				45,513				21,543
Purchase obligations(2)			98,201				57,751				30,558				9,372				520
Obligations under the pension and postretirement medical plans			60,414				4,164				9,395				10,901				35,954
Total(3)			1,632,151				376,061				230,359				385,764				639,967

Liquidity and Capital Resources

Chapter 11 Filing

     As disclosed above, on February 18, 2009, the Debtors filed voluntary petitions for relief under chapter 11 of title 11 of the Bankruptcy Code in the Bankruptcy Court.  For additional information regarding the Company’s liquidity and capital resources see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Overview — “Chapter 11 Bankruptcy Proceedings and Sale Transactions”.

     The following table summarizes the cash flow statements for the year ended December 31, 2008, 2007 and 2006 (amounts are in thousands):

		Year Ended December 31,
														2007 to 2008
		2008				2007				2006				Change
Net cash (used in) provided by:
Operating activities		$	(63,858	)		$	(193,295	)		$	60,970			$	129,437
Investing activities			(49,986	)			(36,834	)			65,280				(13,152	)
Financing activities			(567	)			290,566				(7,316	)			(291,133	)
Effect of exchange rate changes on cash and cash equivalents			(2,740	)			16,807				15,297				(19,547	)
Net increase in cash and cash equivalents		$	(117,151	)		$	77,244			$	134,231			$	(194,395	)

     Operating Activities. Net cash used in operating activities during 2008 decreased $129.4 million over 2007. This decrease was primarily attributable to a decline in net loss, net of non-cash items, as well as decreases to our unbilled revenue, accounts receivable and deferred revenue, despite a decrease in DSOs during 2008.

     Net cash used in operating activities during 2007 increased $254.3 million over 2006. This increase was primarily attributable to an increase in net loss, net of non-cash items, the timing of payment of significant amounts of accounts payable and, to a lesser degree, increases to our combined accounts receivable and unbilled revenue despite a decrease in DSOs during 2007.

     Investing Activities. Net cash used in investing activities increased $13.2 million during 2008 from 2007. This increase was attributable to an increase in capital expenditures of $10.0 million in 2008 from 2007 and an additional $1.8 million of restricted cash was posted as collateral for letters of credit and surety bonds during 2008.

     Net cash used in investing activities during 2007 increased $102.1 million over 2006. This increase was predominantly due to the release of restricted cash posted as collateral for letters of credit and surety bonds. The increase was offset by a decrease of $14.6 million in capital expenditures in 2007 over 2006.

     Financing Activities. Net cash used in financing activities during 2008 was $0.6 million. Net cash provided by financing activities during 2007 was $290.6 million, resulting primarily from the proceeds received from the term loans under the 2007 Credit Facility with an aggregate principal amount of $300.0 million.

     At December 31, 2008, we had global cash balances of $353.1 million. The Company’s ability to generate cash will be governed by its plan of reorganization and its bankruptcy filing as disclosed above.

     In addition, issuances of common stock under the ESPP generated $1.7 million, $12.4 million and $0 in cash during 2008, 2007 and 2006, respectively. Because we were not current in our SEC periodic reports in 2006, we were unable to issue freely tradable shares of our common stock and had not issued shares under the LTIP or ESPP since early 2005. These sources of financing became available to us again once we became current in our SEC periodic reports in 2007; however, we terminated the ESPP effective January 14, 2009.

Debt Obligations

     The following tables present a summary of the activity in our debt obligations for 2008 and 2007 (amounts are in thousands):

		Balance																Balance
		December 31,																December 31,
		2007				Borrowings				Repayments				Other(1)				2008
Convertible debentures		$	675,611			$	—			$	—			$	4,910			$	680,521
Term Loans under the 2007 Credit Facility			297,750				—				—				—				297,750
Other			1,282				3,249				(5,886	)			—				(1,355	)
Total notes payable		$	974,643			$	3,249			$	(5,886	)		$	4,910			$	976,916

		Balance																Balance
		December 31,																December 31,
		2006				Borrowings				Repayments				Other(1)				2007
Convertible debentures		$	671,490			$	—			$	—			$	4,121			$	675,611
Term Loans under the 2007 Credit Facility			—				300,000				(2,250	)			—				297,750
Other			360				2,853				(1,931	)			—				1,282
Total notes payable		$	671,850			$	302,853			$	(4,181	)		$	4,121			$	974,643

2007 Credit Facility

     On May 18, 2007, we entered into a $400.0 million senior secured credit facility and on June 1, 2007, we amended and restated the credit facility to increase the aggregate commitments under the facility from $400.0 million to $500.0 million. The 2007 Credit Facility consists of (1) term loans in an aggregate principal amount of $300.0 million (the “Term Loans”) and (2) a letter of credit facility in an aggregate face amount at any time outstanding not to exceed $200.0 million (the “LC Facility”). The LC Facility is supported by cash deposits made on our behalf by the lenders. If the Company fails to repay any disbursement on a letter of credit and these cash deposits are used to reimburse the issuing bank, the amount of any cash deposits used for such purpose will be considered as additional loans to the Company (the “LC Loans” and, together with the Term Loans, the “Loans”). Interest on the Term Loans under the 2007 Credit Facility is calculated, at the Company’s option, at a rate per annum equal to either (1) 3.5% plus the London Interbank Offered Rate (“LIBOR”) or (2) 2.5% plus a base rate equal to the higher of (a) the federal funds rate plus 0.5% and (b) UBS AG, Stamford Branch’s prime commercial lending rate. Interest on the LC Loans is similarly calculated at the Company’s option at a rate per annum equal to either (1) 4.0% plus LIBOR or (2) 4.0% plus a base rate computed in the same manner as the Term Loans. Debt issuance costs of $18.8 million, mainly comprised of underwriting, commitment, and legal fees, were capitalized into other non-current assets and are being amortized to interest expense over the life of the Loans. As of December 31, 2008, we had $294.8 million outstanding under the Term Loans and an aggregate of approximately $124.3 million of letters of credit issued and outstanding. The Company is charged fees for the LC Facility’s continued availability, which totals 4.125% per annum on the total amount of cash deposits made available from time to time by the lenders under the LC Facility to collateralize their obligation to fund demands made on letters of credit issued under the LC Facility. We are separately charged a fronting fee of 0.1875% per annum on the average daily aggregate outstanding face amount of all letters of credit issued.

     Our obligations under the 2007 Credit Facility are secured by first priority liens and security interests in substantially all of our assets and most of our material domestic subsidiaries, as guarantors of such obligations (including a pledge of 65% of the stock of certain of our foreign subsidiaries), subject to certain exceptions.

     The 2007 Credit Facility requires us to make prepayments of outstanding Loans and cash collateralize outstanding letters of credit in an amount equal to (i) 100% of the net proceeds received from property or asset sales (subject to exceptions), (ii) 100% of the net proceeds received from the issuance or incurrence of additional debt (subject to exceptions), (iii) 100% of all casualty and condemnation proceeds (subject to exceptions), (iv) 50% of the net proceeds received from the issuance of equity (subject to exceptions) and (v) for each fiscal year ending on or after December 31, 2008, the difference between (a) 50% of the Excess Cash Flow (as defined in the 2007 Credit Facility) and (b) any voluntary prepayment of the Loans or the LC Facility (subject to exceptions). In addition, we are required to pay $750,000 in principal plus any accrued and unpaid interest at the end of each quarter, commencing on June 29, 2007 and ending on March 31, 2012.

     The 2007 Credit Facility contains affirmative and negative covenants, customary representations, warranties and covenants, certain of which include exceptions for events that would not have a material adverse effect on the Company’s business, results of operation, financial condition, assets or liabilities.

	•		The affirmative covenants include, among other things: the delivery of unaudited quarterly and audited annual financial statements, all in accordance with generally accepted accounting principles; certain monthly operating metrics and budgets; compliance with applicable laws and regulations (excluding, prior to October 31, 2008, compliance with certain filing requirements under the securities laws); maintenance of existence and insurance; after October 31, 2008, as requested by the Administrative Agent, reasonable efforts to maintain credit ratings; and maintenance of books and records (subject to the material weaknesses previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2005).
	•		The negative covenants, which (subject to exceptions) restrict certain of our corporate activities, include, among other things, limitations on: disposition of assets; mergers and acquisitions; payment of dividends; stock repurchases and redemptions; incurrence of additional indebtedness; making of loans and investments; creation of liens; prepayment of other indebtedness; and engaging in certain transactions with affiliates.

     Events of default under the 2007 Credit Facility include, among other things: defaults based on nonpayment, breach of representations, warranties and covenants, cross-defaults to other debt above $10 million, loss of lien on collateral, invalidity of certain guarantees, certain bankruptcy and insolvency events, certain ERISA events, judgments against us in an aggregate amount in excess of $20 million that remain unpaid, and change of control events.

     The 2007 Credit Facility replaced our 2005 Credit Facility, which was terminated on May 18, 2007. For information about the 2005 Credit Facility, see “— Discontinued 2005 Credit Facility.”

Discontinued 2005 Credit Facility

     On July 19, 2005, we entered into a $150.0 million Senior Secured Credit Facility (the “2005 Credit Facility”). Our 2005 Credit Facility, as amended, provided for up to $150.0 million in revolving credit and advances. Advances under the revolving credit line were limited by the available borrowing base, which was based upon a percentage of eligible accounts receivable and unbilled receivables.

     In 2005 and 2006, we entered into five amendments to the 2005 Credit Facility. Among other things, these amendments revised certain covenants contained in the 2005 Credit Facility, including the extensions of the filing deadlines for our 2005, 2006 and 2007 SEC periodic reports and an increase in the amounts of civil litigation payments that we are permitted to pay and in the aggregate amount of investments and indebtedness that we are permitted to make and incur with respect to our foreign subsidiaries. In addition, in 2007 we obtained several limited waivers that, among other things, waived the delivery requirement of our SEC periodic reports to the lenders under the facility.

     The 2005 Credit Facility was terminated on May 18, 2007. On that date, all outstanding obligations under the 2005 Credit Facility were paid or assumed under the 2007 Credit Facility, and all liens and security interests under the 2005 Credit Facility were released.

Guarantees and Indemnification Obligations

     In the normal course of business, we have indemnified third parties and have commitments and guarantees under which we may be required to make payments in certain circumstances. These indemnities, commitments and guarantees include: indemnities to third parties in connection with surety bonds; indemnities to various lessors in connection with facility leases; indemnities to customers related to intellectual property and performance of services subcontracted to other providers; indemnities to directors and officers under the organizational documents and agreements with them; and guarantees issued between subsidiaries on intercompany receivables. The duration of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite. Certain of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential future payments we could be obligated to make. We estimate that the fair value of these agreements was minimal. Accordingly, no liabilities have been recorded for these agreements as of December 31, 2008.

     We are also required, in the course of business, particularly with certain of our Public Services clients, largely in the state and local markets, to obtain surety bonds, letters of credit or bank guarantees for client engagements. At December 31, 2008, we had

$87.9 million in outstanding surety bonds and $126.2 million in letters of credit extended to secure certain of these bonds. The issuers of our outstanding surety bonds may, at any time, require that we post collateral (cash or letters of credit) to fully secure these obligations.

     From time to time, we enter into contracts with clients whereby we have joint and several liability with other participants and/or third parties providing related services and products to clients. Under these arrangements, we and other parties may assume some responsibility to the client or a third party for the performance of others under the terms and conditions of the contract with or for the benefit of the client or in relation to the performance of certain contractual obligations. In some arrangements, the extent of our obligations for the performance of others is not expressly specified. Certain of these guarantees do not provide for any limitation of the maximum potential future payments we could be obligated to make. As of December 31, 2008, we estimate we had assumed an aggregate potential contract value of approximately $43.8 million to our clients for the performance of others under arrangements described in this paragraph. These contracts typically include recourse provisions that would allow us to recover from the other parties all but approximately $0.3 million if we are obligated to make payments to the clients that are the consequence of a performance default by the other parties. To date, we have not been required to make any payments under any of the contracts described in this paragraph. We estimate that the fair value of these agreements was minimal. Accordingly, no liabilities have been recorded for these contracts as of December 31, 2008.

Critical Accounting Policies and Estimates

     The preparation of our Consolidated Financial Statements in conformity with GAAP requires that management make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. Management’s estimates, assumptions and judgments are derived and continually evaluated based on available information, historical experience and various other assumptions that are believed to be reasonable under the circumstances. Because the use of estimates is inherent in GAAP, actual results could differ from those estimates. The areas that we believe are our most critical accounting policies include:

	•		revenue recognition,
	•		valuation of accounts receivable,
	•		valuation of goodwill,
	•		accounting for income taxes,
	•		valuation of long-lived assets,
	•		accounting for leases,
	•		restructuring charges,
	•		legal contingencies,
	•		retirement benefits,
	•		accounting for stock-based compensation,
	•		accounting for intercompany loans, and
	•		accounting for employee global mobility and tax equalization.

     A critical accounting policy is one that involves making difficult, subjective or complex accounting estimates that could have a material effect on our financial condition and results of operation. Critical accounting policies require us to make assumptions about matters that are highly uncertain at the time of the estimate, and different estimates that we could have used, or changes in the estimate that are reasonably likely to occur, may have a material impact on our financial condition or results of operation.

     Revenue Recognition

     We earn revenue from three primary sources: (1) technology integration services where we design, build and implement new or enhanced system applications and related processes, (2) services to provide general business consulting, such as system selection or assessment, feasibility studies, business valuations and corporate strategy services, and (3) managed services in which we manage, staff, maintain, host or otherwise run solutions and systems provided to our customers. Contracts for these services have different terms based on the scope, deliverables and complexity of the engagement, which require management to make judgments and estimates in recognizing revenue. The Company is compensated on contracts principally through time-and-material arrangements, cost-reimbursable plus fee arrangements, and fixed price arrangements.

     Technology integration services represent a significant portion of our business and are generally accounted for under the percentage-of-completion method in accordance with Statement of Position (“SOP”) 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts” (“SOP 81-1”). A portion of the Company’s revenue is derived from arrangements that include software developed and/or provided by the Company. The Company recognizes software license fees included in these arrangements as revenue in accordance with SOP 97-2, “Software Revenue Recognition,” as amended by SOP 98-9 by applying the provisions of SOP 81-1, as appropriate. Software license fee revenue is generally included in the Company’s technology integration service revenue, which is recognized using the percentage-of-completion method. Under the percentage-of-completion method, management estimates the percentage-of-completion based upon costs to the client incurred as a percentage of the total estimated costs to the client. When total cost estimates exceed revenue, we accrue for the estimated losses immediately. The use of the percentage-of-completion method requires significant judgment relative to estimating total contract revenue and costs, including assumptions relative to the length of time to complete the project, the nature and complexity of the work to be performed, and anticipated changes in estimated salaries and other costs. Incentives and award payments are included in estimated revenue using the percentage-of-completion method when the realization of such amounts is deemed probable upon achievement of certain defined goals. Estimates of total contract revenue and costs are continuously monitored during the term of the contract and are subject to revision as the contract progresses. When revisions in estimated contract revenue and costs are determined, such adjustments are recorded in the period in which they are first identified. Revenue arrangements entered into with the same client that are accounted for under SOP 81-1 are accounted for on a combined basis when they: are negotiated as a package with an overall profit margin objective; essentially represent an agreement to do a single project; involve interrelated activities with substantial common costs; and are performed concurrently or sequentially.

     Revenue for general business consulting services is recognized as work is performed and amounts are earned in accordance with Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements,” as amended by SAB No. 104, “Revenue Recognition” (“SAB 104”). We consider amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable and collectability is reasonably assured. For these types or arrangements, we recognize revenue over the period of performance. Depending on the specific contractual provisions and nature of the deliverable, revenue may be recognized on a proportional performance model based on level of effort, as milestones are achieved or when final deliverables have been provided. Revenue arrangements entered into with the same client that are accounted for under SAB 104 are accounted for on a combined basis when they are entered into at or near the same time, unless it is clearly evident that the contracts are not related to one another.

     For our managed service arrangements, we typically implement or build system applications for customers that we then manage or run for periods that may span several years. Such arrangements include the delivery of a combination of one or more of our service offerings and are governed by Emerging Issues Task Force Issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables.” In managed service arrangements in which the system application implementation or build has standalone value to the customer, and we have sufficient objective evidence of fair value for the managed or run services, we bifurcate the total arrangement into two units of accounting based on the residual method: (i) the system application implementation, or build, which is recognized as technology integration services using the percentage-of-completion method under SOP 81-1 and (ii) the managed or run services, which are recognized under SAB 104 ratably over the estimated life of the customer relationship. In instances where we are unable to bifurcate a managed service arrangement into separate units of accounting, the total contract is recognized as one unit of accounting under SAB 104. In such instances, total fees and direct and incremental costs related to the system application implementation or build are deferred and recognized together with managed or run services upon completion of the system application implementation or build ratably over the estimated life of the customer relationship. Certain managed service arrangements may also include transaction-based services in addition to the system application implementation or build and managed services. Fees from transaction-based services are recognized as earned if we have sufficient objective evidence of fair value for such transactions; otherwise, transaction fees are recognized ratably over the remaining life of the customer relationship period when we determine these fees are realizable. The

determination of fair value requires us to use significant judgment. We determine the fair value of service revenue based upon our recent pricing for those services when sold separately and/or prevailing market rates for similar services.

     Revenue on cost-plus-fee contracts is recognized to the extent of costs incurred plus an estimate of the applicable fees earned. We consider fixed fees under cost-plus-fee contracts to be earned in proportion to the allowable costs incurred in performance of the contract.

     Revenue includes reimbursements of travel and out-of-pocket expenses with equivalent amounts of expense recorded in other direct contract expenses. In addition, we generally enter into relationships with subcontractors where we maintain a principal relationship with the customer. In such instances, subcontractor costs are included in revenue with offsetting expenses recorded in other direct contract expenses.

     Unbilled revenue consists of recognized recoverable costs and accrued profits on contracts for which billings had not been presented to clients as of the balance sheet date. We anticipate that the collection of these amounts will likely occur within one year of the balance sheet date. Billings in excess of revenue recognized for which payments have been received are recorded as deferred revenue until the applicable revenue recognition criteria have been met.

     Valuation of Accounts Receivable

     We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Assessing the collectability of customer receivables requires management judgment. We determine our allowance for doubtful accounts by specifically analyzing individual accounts receivable, historical bad debts, customer concentrations, customer creditworthiness, current economic and accounts receivable aging trends, and changes in our customer payment terms. Our valuation reserves are periodically re-evaluated and adjusted as more information about the ultimate collectability of accounts receivable becomes available. Upon determination that a receivable is uncollectible, the receivable balance and any associated valuation reserve is written off. As noted above in our policy on Revenue Recognition, in the normal course of accounting for long-term contracts, we will periodically adjust our estimates for these contracts which may result in changes to amounts recorded as accounts receivable and/or unbilled revenues.

     Valuation of Goodwill

     Goodwill is the amount by which the cost of acquired net assets in a business acquisition exceeds the fair value of net identifiable assets on the date of purchase. We assess the impairment of goodwill and identifiable intangible assets on at least an annual basis on April 1 and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable, as prescribed in the SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”).

     An impairment review of the carrying amount of goodwill is conducted if events or changes in circumstances indicate that goodwill might be impaired. Factors we consider important that could trigger an impairment review include significant underperformance relative to historical or projected future operating results, identification of other impaired assets within a reporting unit, the more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold, significant adverse changes in business climate or regulations, significant changes in senior management, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, a significant decline in our stock price for a sustained period, or a significant unforeseen decline in our credit rating. Determining whether a triggering event has occurred includes significant judgment from management.

     The goodwill impairment test prescribed by SFAS 142 requires us to identify reporting units and to determine estimates of the fair value of our reporting units as of the date we test for impairment unless an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. As of December 31, 2008, our reporting units consisted of our three North America Industry Groups and our three international regions. To identify impairment, the fair value of the reporting unit is first compared to its carrying value. If the reporting unit’s allocated carrying value exceeds its fair value, we undertake a second evaluation to assess the required impairment loss to the extent that the carrying value of the goodwill exceeds its implied fair value. The fair value of a reporting unit is the amount for which the unit as a whole could be bought or sold in a current transaction between willing parties. We estimate the fair values of our reporting units using a combination of the discounted cash flow valuation model and comparable market transaction models. Those models require estimates of future revenue, profits, capital expenditures and working capital for each unit as well as comparability with recent transactions in the industry. We estimate these

amounts by evaluating historical trends, current budgets, operating plans and industry data. Determining the fair value of reporting units and goodwill includes significant judgment by management and different judgments could yield different results.

     Accounting for Income Taxes

     Provisions for federal, state and foreign income taxes are calculated on reported pre-tax earnings based on current tax law and also include, in the current period, the cumulative effect of any changes in tax rates from those used previously in determining deferred tax assets and liabilities. Such provisions differ from the amounts currently receivable or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes. Significant judgment is required in determining income tax provisions and evaluating tax positions.

     We establish reserves for income tax when, despite the belief that our tax positions are fully supportable, there remains uncertainty in a tax position in our previously filed income tax returns. For tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. For income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the Consolidated Financial Statements. For additional information, see Note 14, “Income Taxes,” of the Notes to the Consolidated Financial Statements.

     The majority of our deferred tax assets at December 31, 2008 consisted of federal, foreign and state net operating loss carryforwards that will expire between 2009 and 2028. During 2008, the valuation allowance against federal, state and certain foreign net operating loss and foreign tax credit carryforwards decreased $24.9 million due to the utilization of foreign tax loss carryovers.

     Since our inception, various foreign, state and local authorities have audited us in the area of income taxes. Those audits included examining the timing and amount of deductions, the allocation of income among various tax jurisdictions and compliance with foreign, state and local tax laws. In evaluating the exposure associated with various tax filing positions, we accrue charges for exposures related to uncertain tax positions.

     During 2005, the Internal Revenue Service commenced a federal income tax examination for the tax periods ended June 30, 2001, June 30, 2003, December 31, 2003, December 31, 2004 and December 31, 2005. During 2007, the Internal Revenue Service opened the examination for the tax period ended June 30, 2002. We are unable to determine the ultimate outcome of these examinations, but we believe that we have established appropriate reserves related to apportionment of income between jurisdictions, the impact of the restatement items and certain filing positions. We are also under examination from time to time in foreign, state and local jurisdictions.

     At December 31, 2008, we believe we have appropriately accrued for exposures related to uncertain tax positions. To the extent we were to prevail in matters for which accruals have been established or be required to pay amounts in excess of reserves, our effective tax rate in a given financial statement period may be materially impacted.

     No significant statute of limitations expired during 2008. During 2007, a statute of limitations expired in one of our foreign taxing jurisdictions. As a result, we recognized a total decrease of $9.1 million in our tax reserve, $1.7 million of which was recognized as a reduction to our income tax expense for the year ended December 31, 2007. During 2006, none of the established reserves expired based on the statute of limitations with respect to certain tax examination periods. An increase to the reserve for tax exposures of $26.1 million, $12.7 million and $13.8 million, was recorded as an income tax expense for changes in exposures in 2008, 2007 and 2006, respectively, including interest and penalties.

     The carrying value of our net deferred tax assets assumes that we will be able to generate sufficient future taxable income in certain tax jurisdictions to realize the value of these assets. If we are unable to generate sufficient future taxable income in these jurisdictions, a valuation allowance is recorded when it is more likely than not that the value of the deferred tax assets is not realizable. Management evaluates the realizability of the deferred tax assets and assesses the need for any valuation allowance. In 2008, we determined that it was more likely than not that a significant amount of our deferred tax assets primarily in the U.S. may not be realized; therefore, we recorded a valuation allowance against those deferred assets.

     Valuation of Long-Lived Assets

     Long-lived assets primarily include property and equipment and intangible assets with finite lives (purchased software and capitalized software). In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we periodically review long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash flows expected to result from the use and eventual disposition of the asset to the carrying amount of the asset. If an impairment is indicated, the asset is written down to its estimated fair value based on a discounted cash flow analysis. Determining the fair value of long-lived assets includes significant judgment by management, and different judgments could yield different results.

     Accounting for Leases

     We lease office facilities under non-cancelable operating leases that expire at various dates through 2017, and may include options that permit renewals for additional periods. Rent abatements and escalations are considered in the determination of straight-line rent expense for operating leases. Leasehold improvements made at the inception of or during the lease are amortized over the shorter of the asset life or the lease term. We receive incentives to lease office facilities in certain areas, which are recorded as a deferred credit and recognized as a reduction to rent expense on a straight-line basis over the lease term.

     Restructuring Charges

     We periodically record restructuring charges resulting from restructuring our operation (including consolidation and/or relocation of operation), changes in our strategic plan or management responses to increasing costs or declines in demand. The determination of restructuring charges requires management to utilize significant judgment and estimates related to expenses for employee benefits, such as costs of severance and termination benefits, and costs for future lease commitments on excess facilities, net of estimated future sublease income. In determining the amount of lease and facilities restructuring charges, we are required to estimate such factors as future vacancy rates, the time required to sublet excess facilities and sublease rates. These estimates are reviewed and potentially revised on a quarterly basis based on available information and known market conditions. If our assumptions prove to be inaccurate, we may need to make changes in these estimates that could impact our financial position and results of operation.

     Legal Contingencies

     We are currently involved in various claims and legal proceedings. We periodically review the status of each significant matter and assess our potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss. We use significant judgment in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Due to the uncertainties related to these matters, accruals are based only on the best information at that time. As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise our estimates. Such revisions in the estimates of potential liabilities could have a material impact on our financial position and results of operation. We expense legal fees as incurred.

     Retirement Benefits

     Our pension plans and postretirement benefit plans are accounted for using actuarial valuations required by SFAS No. 87, “Employers’ Accounting for Pensions,” SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” and SFAS 158, “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans.” The pension plans relate to our plans for employees in Germany and Switzerland. Accounting for retirement plans requires management to make significant subjective judgments about a number of actuarial assumptions, including discount rates, salary growth, long-term return on plan assets, retirement, turnover, health care cost trend rates and mortality rates. Depending on the assumptions and estimates used, the pension and postretirement benefit expense could vary within a range of outcomes and have a material effect on our financial position and results of operation. In addition, the assumptions can materially affect accumulated benefit obligations and future cash funding. For 2008, the discount rate to determine the benefit obligation for the pension plans was 4.9%. The discount rate reflects the rate at which the pension benefits could be effectively settled. The rate is based upon comparable high quality corporate bond yields with maturities consistent with expected pension payment periods. A 100 basis point increase in the discount rate would decrease the 2009 pension expense for the plans by approximately $3.2 million. A 100 basis point decrease in the discount rate would increase the 2009 pension expense for the plans by approximately $2.9 million. The expected long-term rate of return on assets for 2008 was 4.8%. This

rate represents the average of the long-term rates of return for the defined benefit plan weighted by the plan’s assets as of December 31, 2008. To develop this assumption, we considered historical asset returns, the current asset allocation and future expectations of asset returns. The actual long-term rate of return from July 1, 2003 until December 31, 2008 was 14.7%. A 100 basis point increase or decrease in the expected long-term rate of return on the plans’ assets would have had an approximately $0.3 million impact on our 2009 pension expense. As of December 31, 2008, the pension plan had a $3.2 million unrecognized actuarial gain that will be expensed over the average future working lifetime of active participants.

     We also offer a postretirement medical plan to the majority of our full-time U.S. employees and managing directors who meet specific eligibility requirements. For 2008, the discount rate to determine the benefit obligation was 6.1%. The discount rate reflects the rate at which the benefits could be effectively settled. The rate is based upon comparable high quality corporate bond yields with maturities consistent with expected retiree medical payment periods. A 100 basis point increase in the discount rate would decrease the 2008 retiree medical expense for the plan by approximately $3.1 million. A 100 basis point decrease in the discount rate would increase the 2008 retiree medical expense for the plan by approximately $2.6 million. As of December 31, 2008, the postretirement medical plan had $3.4 million in unrecognized actuarial gains that will be expensed over the average future working lifetime of active participants.

     Accounting for Stock-Based Compensation

     We have various stock-based compensation plans under which we have granted stock options, restricted stock awards and stock units to certain officers, employees and non-employee directors. We granted both service-based and performance-based stock units and stock options during 2008. The fair value is generally fixed on the date of grant based on the number of stock units or stock options issued and the fair value of the Company’s stock on the date of grant. For the performance-based stock units and stock options, each quarter we compare the actual performance results with the performance conditions to determine the probability of the award fully vesting. The determination of successful compliance with the performance conditions requires significant judgment by management, as differing outcomes may have a significant impact on current and future stock compensation expense.

     We adopted SFAS No. 123(R), “Share-Based Payment” (“SFAS 123(R)”), on January 1, 2006. This standard requires that all share-based payments to employees be recognized in the statements of operation based on their fair values. We have used the Black-Scholes model to determine the fair value of our stock option awards. Under the fair value recognition provisions of SFAS 123(R), share-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period. Determining the fair value of share-based awards at the grant date requires judgment, including estimating stock price volatility and employee stock option exercise behaviors. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operation could be materially impacted. As stock-based compensation expense recognized in the Consolidated Statements of Operation is based on awards that ultimately are expected to vest, the amount of expense has been reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience. If factors change and we employ different assumptions in the application of SFAS 123(R), the compensation expense that we record in future periods may differ significantly from what we have recorded in the current period.

     We adopted the modified prospective transition method permitted under SFAS 123(R) and consequently have not adjusted results from prior years. Under the modified prospective transition method, the 2006 compensation cost includes expense relating to the remaining unvested awards granted prior to December 31, 2005 along with new grants made during 2006. For grants which vest based on certain specified performance criteria, the grant date fair value of the shares is recognized over the requisite period of performance once achievement of criteria is deemed probable. For grants that vest through the passage of time, the grant date fair value of the award is recognized over the vesting period.

     We elected the alternative transition method as outlined in FASB Staff Position (“FSP”) 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards,” to calculate the historical pool of excess tax benefits available to offset tax shortfalls in periods following the adoption of SFAS 123(R).

     The after-tax stock-based compensation expense impact of adopting SFAS 123(R) for the year ended December 31, 2006 was $25.7 million with a $0.12 per share reduction to diluted earnings per share. Prior to the adoption of SFAS 123(R), we used the intrinsic value method of accounting prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations, including FIN 44, “Accounting for Certain Transactions Involving Stock Compensation,” for our plans. Under this accounting method, stock option compensation awards that are granted with an exercise price at the current fair value of our common stock as of the date of the award generally did not require compensation expense to be recognized in the Consolidated Statements of Operations.

     As of December 31, 2008, there was $1.6 million, $12.8 million and $48.8 million of total unrecognized compensation cost, net of expected forfeitures, related to nonvested options, RSUs and PSUs, respectively, granted under the LTIP. That cost is expected to be recognized over a weighted-average period of 3.1 years, 1.6 years and 1 year, respectively.

     Accounting for Intercompany Loans

     Intercompany loans are classified between long- and short-term based on management’s intent regarding repayment. Translation gains and losses on short-term loans are recorded in other (expense) income, net, in our Consolidated Financial Statements and similar gains and losses on long-term loans are recorded as other comprehensive income in our Consolidated Statements of Changes in Stockholders’ Equity (Deficit). Accordingly, changes in management’s intent relative to the expected repayment of these intercompany loans will change the amount of translation gains and losses included in our Consolidated Financial Statements.

     Accounting for Employee Global Mobility and Tax Equalization

     We have a tax equalization policy designed to ensure that our employees on domestic long-term and foreign assignments will be subject to the same level of personal tax, regardless of the tax jurisdiction in which the employee works. We record for tax equalization expenses in the period incurred. If the estimated tax equalization liability, including related interest and penalties, is determined to be greater or less than amounts due upon final settlement, the difference is recorded in the current period.

     Recently Issued Accounting Pronouncements

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 establishes a single authoritative definition of fair value, sets a framework for measuring fair value and expands on required disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning January 1, 2008 and will be applied prospectively. In February 2008, the FASB issued a Staff Position that (1) partially deferred the effective date of SFAS 157 for one year for certain nonfinancial assets and nonfinancial liabilities and (2) removed certain leasing transactions from the scope of SFAS 157. The adoption of SFAS 157 and its related pronouncements did not have a material effect on our consolidated financial position, results of operations or cash flows.

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FAS 115” (“SFAS 159”). The new statement allows entities to choose, at specific election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item’s fair value in subsequent reporting periods must be recognized in current earnings. SFAS 159 is effective for the fiscal year beginning January 1, 2008. We have elected not to apply the fair value option to any of our financial instruments.

     In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” which replaces SFAS No. 141, “Business Combinations.” This statement establishes principles and requirements for how an acquirer: recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We do not expect this will have a significant impact on our consolidated financial position, results of operations, or cash flows.

In May 2008, the FASB issued FASB Staff Position (“FSP”) Accounting Principles Board Opinion No. 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 requires issuers of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) to separately account for the liability and equity components in a manner that will reflect the issuer’s nonconvertible debt borrowing rate when interest expense is recognized in subsequent periods. The provisions of FSP APB 14-1 shall be applied retrospectively to all periods presented, effective for the fiscal year beginning January 1, 2009. We are continuing to evaluate the impact of the provisions of FSP APB 14-1; however, at this time we believe the incremental interest expense to be recognized as a result of the adoption will be material.

     In October 2008, the FASB issued FSP SFAS No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (“FSP 157-3”). FSP 157-3 clarifies the application of SFAS 157 in a market that is not active and provides

an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP 157-3 became effective immediately, including prior periods for which financial statements have not been issued. Therefore, we have adopted the provisions of FSP 157-3 in our financial statements. The adoption did not have a material impact on our consolidated financial position, results of operations, or cash flows.

     In December 2008, the FASB issued FSP SFAS 132(R)-1, “Employers’ Disclosure about Postretirement Benefit Plan Assets,” effective for fiscal years ending after December 15, 2009. The additional disclosure requirements are designed to provide the users of the financial statements with an understanding of a) how the investment allocation decisions are made; b) the major categories of plan assets; c) the inputs and valuation techniques used to measure the fair value of the plan assets, including the effect of using significant unobservable inputs; and d) significant concentration of risk within plan assets. We do not believe the adoption of this FSP will have a material impact on our consolidated financial position, results of operations, or cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to a number of market risks in the ordinary course of business. These risks, which include interest rate risk and foreign currency exchange risk, arise in the normal course of business rather than from trading activities.

Interest Rate Risk

     Our exposure to potential losses due to changes in interest rates is minimal as our outstanding debt obligations have fixed interest rates. The fair value of our debt obligations may increase or decrease for various reasons, including fluctuations in the market price of our common stock, fluctuations in market interest rates and fluctuations in general economic conditions.

     The table below presents principal cash flows (net of discounts) and related weighted average interest rates by scheduled maturity dates for our debt obligations as of December 31, 2008:

		Expected Maturity Date
		Year ended December 31,
		(In thousands U.S. Dollars, except interest rates)
		2009				2010				2011				2012				2013				Thereafter				Total				Fair Value
U.S. Dollar Functional
Currency Series A
Convertible Subordinated Debentures			—				—				—				—				—			$	250,000			$	250,000			$	62,500
Average fixed interest rate			—				—				—				—				—				3.10	%			3.10	%
U.S. Dollar Functional
Currency Series B
Convertible Subordinated Debentures			—				—				—				—				—			$	200,000			$	200,000			$	66,260
Average fixed interest rate			—				—				—				—				—				4.10	%			4.10	%
U.S. Dollar Functional
Currency Series C
Convertible Subordinated Debentures			—				—				—				—				—			$	200,000			$	200,000			$	137,000
Average fixed interest rate			—				—				—				—				—				5.00	%			5.00	%
U.S. Dollar Functional
Currency
Convertible Senior Subordinated Debentures(1)			—			$	30,521				—				—				—				—			$	30,521			$	19,832
Average fixed interest rate			—				0.50	%			—				—				—				—				0.50	%
U.S. Dollar Functional
Currency
Term Loans under the 2007 Credit Facility		$	3,000			$	3,000			$	3,000			$	285,750				—				—			$	294,750			$	112,100
Average fixed interest rate			4.94	%			4.94	%			4.94	%			4.94	%			—				—				4.94	%
U.S. Dollar Functional
Currency
Other		$	997			$	648				—				—				—				—			$	1,645			$	1,645
Average fixed interest rate			7.93	%			6.32	%			—				—				—				—				7.30	%

Foreign Currency Exchange Risk

     We operate internationally and are exposed to potentially adverse movements in foreign currency rate changes. Any foreign currency transaction, defined as a transaction denominated in a currency other than the U.S. dollar, will be reported in U.S. dollars at the applicable exchange rate. Assets and liabilities are translated into U.S. dollars at exchange rates in effect at the balance sheet date and income and expense items are translated at average rates for the period.

     We have foreign exchange exposures related primarily to short-term intercompany loans denominated in non-U.S. dollars to certain of our foreign subsidiaries. The potential gain or loss in the fair value of these intercompany loans that would result from a hypothetical change of 10% in exchange rates would have been approximately $7.6 million and $3.1 million as of December 31, 2008 and 2007, respectively. For additional information, see Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated Financial Statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See the index included on Page F-1, Index to Consolidated Financial Statements.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     As previously reported, on February 5, 2007, the Chairman of the Audit Committee of the Board (the “Audit Committee”) was notified by our independent registered public accounting firm, PwC, that PwC was declining to stand for re-election and that the client-auditor relationship between the Company and PwC would cease upon PwC’s completion of services related to the audit of our annual financial statements for 2006 and related 2006 quarterly reviews.

     During the Company’s years ended December 31, 2005 and December 31, 2006, and through June 28, 2007, there were no disagreements between the Company and PwC on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or procedure that, if not resolved to PwC’s satisfaction, would have caused it to make reference to the matter in connection with its report on the Company’s consolidated financial statements for the relevant year, and there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K, except that the Company disclosed that material weaknesses existed in its internal control over financial reporting for 2006 and 2005. The material weaknesses identified are discussed in Item 9A of the Company’s Annual Reports on Form 10-K for the year ended December 31, 2006 and for the year ended December 31, 2005. The Company has authorized PwC to respond fully to any inquiries of its successor concerning the material weaknesses. PwC’s audit reports on the Company’s consolidated financial statements for the years ended December 31, 2006 and December 31, 2005 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

     On February 9, 2007, the Audit Committee of the Board, as part of its periodic review and corporate governance practices, determined to engage Ernst & Young LLP (“Ernst & Young”) as the Company’s independent registered public accounting firm commencing with the audit for the year ending December 31, 2007. Ernst & Young also has been engaged as the independent registered public accounting firm for the 401(k) Plan, commencing with the audit for the 401(k) Plan’s year ending December 31, 2007. During the Company’s years ended December 31, 2005 and December 31, 2006, and through February 9, 2007, neither the Company, nor anyone on its behalf, consulted with Ernst & Young with respect to either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements for 2006 or 2005, and no written report or oral advice was provided by Ernst & Young to the Company that Ernst & Young concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing, or financial reporting issue for 2006 or 2005 or (ii) any matter that was the subject of either a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

     As of the end of the period covered by this Annual Report, management performed, with the participation of our Chief Executive Officer and our Chief Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on the evaluation performed, with the participation of our Chief Executive Officer and our Chief Financial Officer, we concluded that as of December 31, 2008, because of the existence of the material weakness discussed below, the Company’s disclosure controls and procedures were not effective.

     We believe that because we performed substantial additional procedures to compensate for the material weakness, our consolidated financial statements included in this Annual Report are fairly stated in all material respects.

Management’s Report on Internal Control over Financial Reporting

     Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

     Management has conducted, with the participation of our Chief Executive Officer and our Chief Financial Officer, an assessment, including testing of the effectiveness of our internal control over financial reporting as of December 31, 2008. Management’s assessment of internal control over financial reporting was conducted using the criteria in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

     A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. In connection with management’s assessment of our internal control over financial reporting, we identified a material weakness in our internal control over financial reporting as of December 31, 2008. Specifically, we did not design effective controls to capture and accrue costs incurred but not yet invoiced by third party suppliers and contractors. In addition, we did not maintain adequate controls over the approval and processing of purchase orders.

     The above material weakness affects the completeness, accuracy and timeliness of the recording of accounts payable, accrued liabilities, and other current and non-current liabilities. Until the underlying control deficiencies are remediated, this material weakness could result in a material misstatement of our annual or interim consolidated financial statements. Management will continue to perform additional procedures to mitigate the risk of misstatement otherwise mitigated by an effective control environment. Because of the material weakness described above, management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2008, based on the Internal Control — Integrated Framework issued by COSO.

     The effectiveness of our internal control over financial reporting as of December 31, 2008 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere in this Item 9A.

Changes in Internal Control over Financial Reporting

     Senior management implemented significant changes in internal control over financial reporting. These changes represent changes that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting. These improvements in our internal control over financial reporting have enabled us to significantly strengthen our control environment, the completeness and accuracy of underlying accounting data, and the timeliness with which we are able to close our books. The areas remediated were attained through:

	•		Implementation of numerous formal management financial review monitoring controls within the financial statement close and reporting process in our Asia Pacific region,
	•		Strengthening of policies and procedures across the organization, and
	•		The continued adherence to revenue related policies and the maturity of internal controls over revenue and related revenue accounts.

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, on Internal Control over Financial Reporting

The Board of Directors and Stockholders of BearingPoint, Inc.:

     We have audited BearingPoint, Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). BearingPoint, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

     We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

     A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

     A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment. Management has identified a material weakness in controls relating to the Company’s accounts payable and accrual process. This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2008 financial statements and this report does not affect our report dated March 30, 2009, except for Note 22 as to which the date is June 4, 2009, on those financial statements that included an explanatory paragraph regarding BearingPoint, Inc.’s ability to continue as a going concern.

     In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, BearingPoint, Inc. has not maintained effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria.

/s/ Ernst & Young LLP

McLean, Virginia
March 30, 2009

ITEM 9B. OTHER INFORMATION

     None.

PART III.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

     Our Board currently consists of four directors. Information about our directors as of June 1, 2009 is provided below. For information about our executive officers, please see “Executive Officers of the Registrant” included in Part I of this Annual Report.

Reduction in Size of Board of Directors

     On May 27, 2009, the Board unanimously approved a reduction in its size from ten members to four members, which became effective as of 12:00 p.m., Eastern time, on June 1, 2009. The Board believes that this reduction in size is appropriate to facilitate the responsibilities and obligations of the Board in connection with the Company’s bankruptcy proceedings and potential Sale Transactions.

     In connection with this reduction, each of Douglas C. Allred, Betsy J. Bernard, Jill S. Kanin-Lovers, Wolfgang H. Kemna, Albert L. Lord and J. Terry Strange voluntarily resigned from the Board, effective as of the 12:00 p.m., Eastern time, on June 1, 2009. After such resignations, the Board is currently composed of F. Edwin Harbach, Roderick C. McGeary, Frederic F. Brace and Eddie R. Munson.

     In addition, as of June 1, 2009, the full Board will fulfill the obligations and responsibilities previously assigned to the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee of the Board.

     Frederic F. Brace, age 51, has been a member of the Board since January 1, 2009. Mr. Brace retired from UAL Corporation (United Air Lines, Inc.) where he served as Executive Vice President and Chief Financial Officer from August 2002 to 2008, and held various other senior management positions at UAL from 1983 to 2002.

     F. Edwin Harbach, age 55, has been Chief Executive Officer and a member of the Board since December 2007. Mr. Harbach also served as the Company’s President and Chief Operating Officer from January 2007 to December 2007. From 1976 until his retirement in 2004, Mr. Harbach held various positions with and served in leadership roles at Accenture Ltd, a global management consulting, technology services and outsourcing company, including chief information officer, Managing Partner of Japan and Managing Director of Quality and Client Satisfaction.

     Roderick C. McGeary, age 58, has been a member of the Board since August 1999 and Chairman of the Board since November 2004. From March 2005 until December 2007, Mr. McGeary served the Company in a full-time capacity, focusing on clients, employees and business partners. From 2004 until 2005, Mr. McGeary served as our Chief Executive Officer. From 2000 to 2002, Mr. McGeary was the Chief Executive Officer of Brience, Inc., a wireless and broadband company. Mr. McGeary is a director of Cisco Systems, Inc., a worldwide leader in networking for the Internet, and Dionex Corporation, a manufacturer and marketer of chromatography systems for chemical analysis.

     Eddie R. Munson, age 58, was our Chief Financial Officer on an interim basis from June 2008 through November 2008 and a member of the Board since October 2007. He is a retired partner with KPMG and has more than 30 years of auditing experience focusing on the financial services, government and automotive industries. From 1996 to 2004, Mr. Munson was a member of KPMG’s board of directors, where he was a member of the pension committee and chair of the committees responsible for partner rights and board nominations. Most recently, Mr. Munson was the national partner in charge of KPMG’s University Relations and Campus Recruiting programs. Mr. Munson is also a director of United American Healthcare Corporation.

     No family relationships exist between any of the directors or between any director and any executive officer of the Company.

Executive Sessions of Non-Management Directors

     Our non-management directors who are not employees of the Company meet separately on a regular basis.

Audit Committee

     Following the reduction in the size of our Board in June 2009, the full Board will fulfill the obligations and responsibilities previously assigned to the Audit Committee. The Board believes that this is appropriate in light of the reduced size of the Board and the Board’s obligations in connection with the Company’s bankruptcy proceedings and potential Sale Transactions. The Board has determined that Mr. Munson is an “audit committee financial expert” as defined in Item 401(h) of Regulation S-K.

Compensation Committee Interlocks and Insider Participation

     To the Company’s knowledge, there are no other relationships involving members of the Board requiring disclosure in this Annual Report.

Standards of Business Conduct

     On May 10, 2007, the Board approved our Standards of Business Conduct (the “SBC”), which superseded our prior Code of Business Conduct and Ethics. The SBC became effective as of May 31, 2007. The SBC was developed as part of our commitment to enhancing our culture of integrity and our corporate governance policies. The SBC reflects changes in law and regulation, best practices and updates to the Company’s policies. In addition, the SBC contains new or enhanced policies and/or procedures relating to violations of the SBC, conflicts of interest (including those related to the giving and receiving of gifts and entertainment), financial disclosures, the importance of maintaining the confidentiality of Company, client and competitor information, data privacy and protection, Company property, investor and media relations, records management, and lobbying/political activities. The SBC applies to all of our directors and employees, including our principal executive officer, principal financial officer and principal accounting officer. The SBC is posted on our website, at www.bearingpoint.com in the Corporate Governance. We intend to satisfy the disclosure requirement regarding any amendment to, or waiver of, a provision of the SBC for our Chief Executive Officer, Chief Financial Officer, Corporate Controller or persons performing similar functions, by posting such amendment or waiver on our website within the applicable deadline that may be imposed by government regulation following the amendment or waiver. A printed copy of the SBC documents is available free of charge to any person who makes a request to our Investor Relations team at 973-214-9953.

Committees

     Following the reduction in the size of our Board in June 2009, and given the Company’s bankruptcy proceedings and the various Sale Transactions, the full Board will fulfill the obligations and responsibilities previously assigned to the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee. As the full Board now consists of four members, the Board does not believe that having separate committees is efficient in light of the Company’s situation and the speed at which events are occurring.

Communications with Board of Directors

     The Board welcomes your questions and comments. If you would like to communicate directly with our Board or our non-management directors of the Board as a group, you may submit your communication to our Chief Legal Officer by writing to them at the following address:

BearingPoint, Inc.
c/o Chief Legal Officer
100 Crescent Court, Suite 700
Dallas, Texas 75201

     All communications and concerns will be forwarded to our Board or our non-management directors as a group, as applicable. We also have established a dedicated telephone number for communicating concerns or comments regarding compliance matters to the Company. The phone number is 1-800-206-4081 (or 240-864-0229 for international callers), and is available 24 hours a day, seven days a week. The SBC prohibits any retaliation or other adverse action against any person for raising a concern. If you wish to raise your concern in an anonymous manner, you may do so by calling the telephone number listed above.

Section 16(a) Beneficial Ownership Reporting Compliance

     Under the U.S. Federal securities laws, directors and executive officers, as well as persons who beneficially own more than ten percent of our outstanding common stock, must report their initial ownership of the common stock and any changes in that ownership to the SEC. The SEC has designated specific due dates for these reports, and we must identify in this Annual Report those persons who did not file these reports when due. Based solely on a review of copies of Forms 3, 4 or 5 filed by us on behalf of our directors and executive officers or otherwise provided to us and copies of Schedule 13Gs, we believe that all of our directors, executive officers and greater than ten percent stockholders complied with their applicable filing requirements for 2008.

ITEM 11. EXECUTIVE COMPENSATION

     Effective 12:00 p.m., Eastern time, on June 1, 2009, the Board was reduced in size from ten members to four members. In addition, the remaining members of the Board are fulfilling the obligations and responsibilities previously assigned to the Compensation Committee. References in the “Compensation Discussion and Analysis” below to the “Compensation Committee” or “Committee” refer to the Compensation Committee prior to the reduction in the size of the Board. As most decisions related to compensation occurred prior to June 1, 2009, this discussion, where appropriate, refers to the actions and decisions of the former directors, Jill Kanin-Lovers, Betsy J. Bernard and Douglas C. Allred, who previously comprised the Compensation Committee. However, as set forth below in the “Report of the Board of Directors on Executive Compensation,” the current Board has approved such actions and decisions of the Compensation Committee discussed below.

Compensation Discussion and Analysis

     Prior to June 1, 2009, the Compensation Committee of our Board of Directors (the “Committee”) determined the compensation of our executive officers, including making individual compensation decisions, and reviewing and monitoring the compensation programs applicable to our executive officers. This discussion describes the Committee’s determination of 2008 compensation for our named executive officers.

Bankruptcy Proceedings and Sale of Assets

     The Company is currently undergoing bankruptcy proceedings and is in the process of selling all or substantially all of its assets. In addition, the Board has not yet fully evaluated the effect of the Chapter 11 Cases and disposition of assets on its compensation practices. However, it is expected that the Board will not make any significant changes to executive compensation in 2009, except as set forth below, due, in part, to the uncertainties regarding the bankruptcy and sale processes and the likelihood that the Company will no longer continue as a going concern. If necessary, upon the completion of the Chapter 11 Cases, the Board will review and modify the compensation philosophy and objectives set forth below. Please note that the discussion below relates to compensation determinations that were made during the course of 2008 and early 2009. Moreover, due to the Chapter 11 Cases, all significant compensation decisions and changes to compensation must be approved by the Bankruptcy Court and, as such, the Board cannot be assured that any compensation decisions that it makes going forward would be approved.

Key Employee Incentive Plan

      Due to the difficulties currently faced by the Company’s employees in managing the Chapter 11 Cases and the sale process, the Board is evaluating the implementation of a new program that seeks to motivate employees to maximize the Company’s value during the sale and bankruptcy processes. Any amounts paid to employees through such program would be subject to the Company achieving certain established milestones. Currently, the Board is still discussing the potential implementation and specifics of such a plan, however, any plan that is approved will be subject to the approval of the Bankruptcy Court.

Changes in Management in 2008

     In 2008, there were several changes in our executive management team. On March 17, 2008, David Hunter was named as our Chief Operating Officer, effective as of March 13, 2008. As of May 13, 2008, Eileen A. Kamerick was appointed as our Chief Financial Officer, replacing Judy A. Ethell in such position. Ms. Ethell, however, agreed to continue as an employee until July 31, 2008 to assist in the transition to the new chief financial officer. Ms. Ethell entered into a separate compensation arrangement at such time; therefore, the Committee did not make any 2008 bonus determinations for Ms. Ethell. Effective as of June 2, 2008, Ms. Kamerick resigned as Chief Financial Officer and Eddie R. Munson, a director of the Board and former member of the Audit Committee, agreed to serve as the Company’s Chief Financial Officer on an interim basis, effective as of June 2, 2008. Pursuant to Mr. Munson’s compensation arrangement with the Company, he did not participate in our bonus compensation program and did not receive any equity awards as compensation. As such, the Committee did not make any 2008 bonus determinations for Ms. Kamerick or Mr. Munson. Effective as of November 11, 2008, Kenneth A. Hiltz, a managing director of AlixPartners, LLP, was appointed as our Chief Financial Officer, at which point Mr. Munson ceased to serve as the interim Chief Financial Officer and resumed his duties as a member of the Board and the Audit Committee. Pursuant to an interim management services agreement, the Company paid AlixPartners a fee based on an hourly rate for time worked by Mr. Hiltz and also paid or reimbursed AlixPartners for reasonable out-of-pocket expenses. As Mr. Hiltz is not an employee of the Company, he does not receive any compensation, or bonus, directly from the Company and does not participate in the Company’s employee benefit plans. On November 19, 2008, Laurent C. Lutz provided the Company with notice of his intention to terminate his employment with the Company and to resign from his positions as Chief Legal Officer and Secretary. We agreed with Mr. Lutz that he would cease to be an employee of the Company as of the close of business on December 31, 2008; however, Mr. Lutz entered into an independent contractor agreement with the Company where he was compensated on an hourly basis through February 15, 2009. John DeGroote was appointed as Chief Legal Officer of the Company, effective on December 31, 2008; however, Mr. DeGroote is not considered a named executive officer.

     On May 27, 2009, the Bankruptcy Court entered an order authorizing the Company’s rejection of (i) the employment letter agreement dated March 13, 2008 between the Company and David R. Hunter, the Company’s Chief Operating Officer, and (ii) the Special Termination Agreement dated March 13, 2008 between the Company and David R. Hunter. Pursuant to the order, such agreements will be deemed to be rejected effective as of April 29, 2009. In accordance with the order, Mr. Hunter has 30 days from the date the order is served on him to file a proof of claim to assert any damage claim arising from the rejection of such agreements.

Overall Compensation Philosophy and Objectives

     In 2008, our compensation philosophy continued to center on our desire to enhance corporate performance and stockholder value by aligning the financial interests of our executive officers with those of our stockholders. We implemented this philosophy by adopting “pay for performance” measures, based upon both individual performance and Company performance. Our goal was to design compensation programs that would:

• attract and retain the best possible talent;

• recognize and reward outstanding individual performance;

• motivate our people to deliver quality service to our clients, in order to drive client satisfaction and the profitability of our Company;

• provide for cash and long-term incentive compensation at levels that are competitive with companies within our industry and of similar size (targeting total target compensation to remain at approximately the 50th percentile); and

• communicate individual metrics openly and transparently, to influence employee performance and accountability.

How Compensation is Determined

     The Committee devoted a substantial portion of its time to determining the compensation of our executive officers. This process includes reviewing market data, sharing best practices, determining appropriate milestones to assess Company performance, and discussing appropriate levels of compensation based upon both individual and Company performance. In addition, the Committee engaged, from time to time, a compensation consultant for independent guidance and expertise. For 2008, we engaged Towers Perrin to provide its counsel related to various executive compensation matters. In addition, the Committee considered the financial performance and outlook of the Company for 2009 and beyond when assessing and reviewing its compensation decisions for the executive officers.

     As part of the process, the Committee considered peer benchmarking information, which is used to assess the level of our executive officer compensation relative to a group of peer companies, and to compare the mix of total compensation. For 2008, the Committee reviewed market comparisons for all companies participating in the Towers Perrin U.S. Executive Compensation Databank within the business services or information technology industries (the “Peer Companies”). This broad industry peer group for 2008 consisted of 38 companies:

Accenture Ltd		eBay Inc.		IKON Office Solutions, Inc.
ADVO, Inc.		eFunds Corporation		IMS Health Incorporated
APAC Customer Services, Inc.		Electronic Data Systems Corporation		Iron Mountain Inc.
ARAMARK Corporation		EMC Corporation		Kelly Services Inc.
Automatic Data Processing, Inc.		Emdeon Corporation		MacDonald Dettwiler & Assoc.
Booz Allen Hamilton Inc.		Equifax Inc.		Oracle Corporation
CA, Inc.		First Data Corporation		Pitney Bowes Inc.
Ceridian Corporation		Fiserv, Inc.		Robert Half International Inc.
CheckFree Corporation		G&K Services, Inc.		Symantec Corporation
CitiStreet		Gartner, Inc.		TeleTech Holdings Inc.
Convergys Corporation		The GEO Group, Inc.		Unisys Corporation
Deluxe Corporation		GTECH Holdings Corp		Viad Corp.
Dendrite International Inc.		H&R Block, Inc.

     In addition, the Committee reviewed its compensation decisions against compensation data for 9 direct peer companies, provided through a survey prepared by Towers Perrin. These companies were:

Accenture Ltd		Gartner, Inc.
Booz Allen Hamilton Inc.		International Business Machines Corporation
Cap Gemini U.S.		SAIC
Deloitte Consulting		Unisys Corporation
Diamond Management & Technology Consultants

     Generally, the Committee determined executive compensation based upon the total amount of compensation relative to the Peer Companies, with the general goal of setting the level of compensation at approximately the 50th percentile. Given the challenges and financial uncertainties facing the Company, the Committee did not set specific goals and target compensation levels for its executive officers in 2008, as the Committee wanted management to focus on addressing the Company’s substantial issues. The Committee determined that it would be more appropriate to review, in early 2009, the Company’s performance, situation and outlook upon the completion of fiscal year 2008 before making bonus decisions, including decisions regarding the mix of compensation. Prior to June 1, 2009, the Committee had determined that no bonus payouts would be made for any executive officers for 2008 and the Board has not decided, to date, to change or alter such decision.

     As part of its regular decision-making process, the Committee met with the Chief Executive Officer to discuss the annual performance of each executive officer (and in the case of the Chief Executive Officer, the Committee met with both the Chairman of the Board and other members of the Board). The Committee then deliberated and determined the executive officer’s compensation, taking into account management’s recommendations, the executive officer’s individual performance and Company performance and market data. For 2008 decisions, the Committee examined the bankruptcy proceedings, the current state of the Company and a short- and long-term outlook of the Company’s prospects, among other factors.

Principal Components of Executive Officer Compensation