- Associated Press - Thursday, March 20, 2014

WASHINGTON (AP) - The Justice Department is investigating a flamboyant Wall Street financier who won millions of dollars in military contracts and then hired the Army officer who allegedly steered the money her way.

Interviews and documents obtained by The Associated Press portray entrepreneur Lynn Tilton and Col. Bert Vergez as being in unusually close contact for more than a year before Vergez retired from the Army in late 2012. Among the allegations is that Vergez provided Tilton with details about upcoming contracts to give her company, MD Helicopters of Mesa, Ariz., an advantage over the competition. No charges have been filed.

Vergez went to work for Tilton less than three months after hanging up his uniform. The Justice Department is examining whether his hiring breached “revolving door” rules that require federal officials to wait a year or more before receiving compensation from a company they had dealings with while employed by the government, according to people knowledgeable of the inquiry but not authorized to be identified as the sources of the information. Vergez’s ties to two Russian businessmen also are being investigated.

AP last week sent a list of questions to Davidson Goldin, a spokesman for Tilton and her company. Goldin declined to comment. Vergez did not return emails and telephone calls. Justice Department spokeswoman Allison Price said the department had no comment on the investigation.

The allegations run counter to the by-the-bootstraps image Tilton has cultivated since founding the private equity firm Patriarch Partners in 2000. With her platinum blonde hair and trademark stiletto heels, the Bronx, N.Y.-born Tilton relishes her role as a maverick in the buttoned-down world of finance.

Her portfolio includes MD Helicopters and 74 other companies that employ 120,000 people and generate more than $8 billion in revenue. Tilton’s biography posted on Patriarch’s web site attributes her success to a “tireless work ethic, innovative spirit and an unwavering quest for truth and light where others see hopelessness.”

The investigation offers a window into the fiercely competitive arena of government contracting. Boeing, a defense industry giant, sought information last year about the circumstances of Vergez’s hiring, a request one of Tilton’s lawyers viewed as an attempt to intimidate the smaller MD Helicopters, documents show.

At the time, Boeing and MD Helicopters were locked in a legal battle. The dispute stemmed from a 2005 arrangement under which Boeing would offer a helicopter for an Army contract that was based on an airframe designed by MD Helicopters. Boeing didn’t win, and the program was later cancelled. When the Army launched a successor program, known as the Armed Aerial Scout, Boeing argued the previous arrangement still applied and MD Helicopters should be barred from competing.

David Ruppert, then general counsel for MD Helicopters, rebuffed the request and rebuked Boeing for trying to bully Tilton’s company into settling the dispute. In a letter to Boeing senior counsel Anthony Tumminello, Ruppert called the inquiry a “baseless insinuation of improper conduct.” He warned Tumminello that if Boeing “disseminates any false allegations of misconduct,” Tilton’s company “will vigorously seek to hold Boeing fully accountable.”

John Dern, a spokesman for Boeing, declined to comment. Ruppert did not return telephone calls.

On a separate but parallel track, the FBI and Defense Criminal Investigative Service are conducting an inquiry into Vergez’s connections to Russian businessman Pavel Borisov, and his father and business partner, Yuri.

The probe is focused on why the Army acquisition office in Huntsville, Ala., that Vergez ran kept dealing with the Borisovs even though they had a dismal performance record on a contract to overhaul Russian Mi-17 helicopters.

Despite the inquiry, Vergez pushed his new employer to appoint Pavel Borisov as its sales representative in Russia, Ukraine and nine other former Soviet republics, according to internal company emails discussing the move.

A copy of Borisov’s March 2013 agreement, signed by Craig Kitchen, chief commercial officer for MD Helicopters, said Borisov would maintain exclusive rights to the territory provided he generated sales of $50 million. But the agreement was terminated seven months later because Borisov failed to complete the required background checks, the emails show.

Government attorneys have instructed Tilton and her companies to turn over a broad range of records, including Tilton’s phone and expense records and communications between her, her employees and Vergez that discussed his potential employment. They also have requested information about any payments to Borisov.

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