MD Helicopters Hit with Federal Fraud Verdict

 - October 18, 2021, 4:03 PM

Two former MD Helicopters executives could cash in big after a federal jury last month found the company guilty of fraud in relation to military sales to El Salvador, Saudi Arabia, and Costa Rica in 2011 and 2012. Under federal law, the $36 million damage award could be trebled, and whistleblowers Philip Marsteller and Robert Swisher, who originally filed the complaint in 2013, could receive up to 30 percent of the final amount. 

The award calls into question the future market value of MD, which is widely believed to be being primed for sale since the departure of former CEO Lynn Tilton in 2020. Tilton was dismissed as a party to the suit prior to trial. Through a spokesman, MD Helicopters declined to comment when contacted by  AIN

These fraud charges centered on Col. Norbert Vergez, who ran the U.S. Army’s non-standard rotary-wing program from 2010 to 2012, and his relationship with MD, which became his employer via Tilton and her management company, Patriarch Partners, in 2013. Vergez pled guilty to making false statements and criminal conflict of interest in 2015. The charges stemmed from his failure to report receiving $30,000 for “relocation expenses” related to his immediate post-service employment with Patriarch and from his nondisclosure of the gift of a $4,000 Rolex watch to his wife. She had received the Rolex from the wife of a Lithuanian executive involved in a deal for the U.S. Army to provide Russian Mi-17 helicopters for the Afghan Army. 

In Marsteller and Swisher’s initial complaint, they cited the “level of Col. Vergez's subservience to [MD CEO Lynn] Tilton and his continuing involvement in MD's Army contracts” after accepting a job offer from the company. But by 2015 Vergez no longer worked at Patriarch, and that company was not implicated in the investigation. MD is currently under the direction of CEO Alan Carr and the investment funds that have equity positions in MD and other Patriarch portfolio companies are administered in bankruptcy.