The Free Press, Mankato, MN

State, national news

March 1, 2014

Odd couple at center of Russian helicopter inquiry

(Continued)

"By allowing his name to be linked to property owned by an executive of a company with which the Army does business, Col. Vergez showed either a brazen disregard for contracting regulations or a serious lack of judgment," Gordon said.

In his new post, Vergez supported AviaBaltika and SPARC's bid for $11 million in additional compensation even though the auditors found no evidence a required cost analysis had ever been completed.

The companies argued that the delays in overhauling the helicopters were not their fault, but caused by another contractor's failure to supply replacement parts. As a result, AviaBaltika and SPARC said they incurred expenses they should not have had to absorb, the records show.

They cited the costs of preparing for and attending meetings and writing letters to resolve the problems, noting labor rates between $250 and $650 an hour, which translated into annual salaries as high as $1.3 million a year. The inspector general's audit called the rates unreasonable.

Ultimately, AviaBaltika and SPARC would receive just $1.2 million after Pentagon officials in Washington intervened and instructed Vergez's office to make no further payments, according to a person familiar with the transaction but not authorized to be identified as the source of the information.

Despite that performance, in April 2011, AviaBaltika and SPARC won a contract to overhaul five more Mi-17s, the records show. The new work flowed to Borisov's companies through a larger contract Vergez's office had with Science and Engineering Services, Inc., a government contractor in Huntsville.

Nearly $14 million has been spent on the subcontract even though the helicopter overhauls have not been completed, according to an Army budget document.

Just before Vergez retired from the Army, he laid out a plan through which Science and Engineering Services would acquire new Ukranian-built engines for Mi-17s the U.S. was buying for Afghanistan. AviaBaltika was the licensed distributor for the Motor Sich engines in the U.S. and stood to earn millions of dollars.

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