MD Helicopters battered and buffeted by whistleblower lawsuit, fraud claims

Wilmington, DEMD Helicopters Inc. appears to have secured financing that will allow the company to emerge from bankruptcy as an operating business. The company’s Chapter 11 bankruptcy petition was, however, only the latest twist in a case that began as a whistleblower lawsuit in 2013.

The revolving door and the fraud that followed

The underlying facts of United States ex re. Marstellar v. Tilton are complicated because they involve several military procurement contracts negotiated over a period of years with MD Helicopters, as well as a significant re-interpretation of the requirements of the federal False Claims Act (FCA). Nonetheless, the basic story is that the military contractor unfairly influenced the contract award process by dangling the offer of a post-retirement job in front of the individual in charge of making the decision.

The key players are:

• Colonel Norbert Vergez, who was the Program Manager for the Army's Program Management Office for Non-Standard Rotary Wing Aircraft during the time the contracts were awarded;
• Lynn Tilton, who had described herself as the business world's "turnaround queen" and who was then the CEO of MD Helicopters; and
• Philip Marsteller and Robert Swisher, two former MD Helicopter employees, who filed a FCA complaint.

Marsteller and Swisher originally filed their FCA complaint in 2013. The initial complaint reportedly cited the “level of Col. Vergez's...

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