Bert Vergez and Yuri Borisov being probed over US helicopter project
Ex-US army officer and Russian entrepreneur being investigated over anti-terror programme
The ties between a former US army colonel and a Russian entrepreneur are central to a criminal investigation into a programme that supplies American allies with Russian helicopters.
United States federal agents are examining why an obscure defence department acquisition office that was run by former colonel Bert Vergez repeatedly championed Yuri Borisov's companies despite their dismal record on a prior contract to refurbish Mi-17 aircraft, according to interviews and documents.
When Borisov insisted on being paid millions of dollars extra for overhaul work his companies were late on, Vergez supported him.
When Borisov sought a new multimillion-dollar helicopter overhaul contract, it was Vergez's office that approved the deal.
When auditors from the Pentagon inspector general's office were uncovering signs of illegal activity, it was Vergez who backed a plan to install new engines on Mi-17s bound for Afghanistan, in an arrangement that promised millions of dollars in revenue for Borisov.
Borisov's companies, AviaBaltika Aviation and Saint Petersburg Aircraft Repair, are still technically eligible to receive US contracts. The inspector general's audit recommended that the army debar or suspend them, but nothing has happened more than a year later.
The FBI and defence criminal investigative service are leading the inquiry. Vergez, 48, spent 25 years in uniform before retiring from service. In 2001, he was assigned to the command that manages the aviation budget.
Born in 1956, Borisov served in the Soviet military for 10 years and launched his aviation companies in the early 1990s. AviaBaltika is based in Kaunas, Lithuania. Saint Petersburg Aircraft Repair, better known as Sparc, operates from Russia.
In Lithuania, Borisov is known for his flamboyant lifestyle and a scandal that led to the impeachment in 2004 of Lithuania's president, Rolandas Paksas. Paksas was unseated after Borisov, his campaign's top backer, was linked to Russian gangsters.
No charges were laid against Borisov, but the US embassy in Lithuania kept a close eye on him and his businesses. Tom Kelly, then the embassy's deputy chief of mission, called AviaBaltika "infamous" in a cable published by the Wikileaks website.
AviaBaltika and Sparc were employed to overhaul 10 Mi-17 helicopters, part of the US strategy to defeat al-Qaeda and other extremist groups. The Pentagon has acquired dozens of new and used Mi-17s to give to Iraq, Afghanistan, Pakistan and other countries to fight terrorism.
But Borisov's companies ran into trouble. A US$38 million job to refurbish the Mi-17s ballooned to more than US$64 million and helicopter delivery dates were missed, according to the Pentagon inspector general's audit.
Government contracting officers kept paying the bills for what auditors described as unquestioned and unnecessary costs.
Jonas Bazaras, AviaBaltika's commercial director, said that the audit's findings "are not consistent with the reality", but declined to comment further.