In less than 15 years, Armor Holdings grew from a small company making bulletproof vests in Yulee to a multinational company selling military and law enforcement equipment all over the globe.
Annual sales rose from $12 million to $2.4 billion. Forbes twice named it one of America's fastest-growing companies.
And it went from bankruptcy in 1993 to being sold for $4.5 billion in 2007.
But, investigators said, the years leading up to that sale were also marked with illegal exports, kickbacks, bribery of foreign officials and the sale of faulty equipment to the military and other agencies.
A top former Armor Holdings executive accused of orchestrating the illicit deals, including $4.4 million in bribes, has been charged with a variety of crimes.
After being caught, that executive helped the FBI in an elaborate sting operation that led to the arrest of 22 more executives from military supply companies across the United States and Great Britain. Two of them are former presidents and CEOs at Armor Holdings and its predecessor, American Body Armor & Equipment.
The case is both a glimpse into the world of international military supply and the story of Richard T. Bistrong of Ponte Vedra Beach, the former vice president of international sales for Armor Holdings and the only person charged with wrongdoing while at the company. During part of the time covered by the indictment, Bistrong was married to a former U.N. representative.
Notably, Bistrong turned out to be a key figure in what the Justice Department called the first undercover sting involving the Foreign Corrupt Practices Act, enacted in 1977, which prohibits paying bribes to foreign officials to get business.
In 2007, Armor Holdings revealed in a quarterly report that some employees were fired and others resigned after the United Nations had contacted the company about possible improper payments connected to U.N. contracts. The company did not reveal at the time who they were.
BAE Systems, which now owns Armor, refused to comment for this story.
The sting
Last spring, two years after the FBI began its investigation into foreign bribery, the sting began. Bistrong and an undercover FBI agent who posed as an African defense ministry official met with a series of military/law enforcement supply executives, seeking to award a $15 million contract.
In each of the meetings last May, as many as four a day in fancy hotels in Miami and Washington, Bistrong and the FBI agent offered contracts and made the same request, according to court documents: They asked that a 20 percent "commission" be added to each order and that the extra money be kicked back to them.
The indictments said that 22 people representing 16 companies from Florida to California and the United Kingdom agreed to the scheme, including two former Armor presidents, Jonathan M. Spiller of Ponte Vedra Beach and Stephen Gerard Giordanella of Pompano Beach.
Giordanella was president of American Body Armor until he resigned in 1991. He had most recently been CEO of Protective Products of America in Sunrise and was listed as a consultant when he was involved in discussions to sell body armor plates to Bistrong and the FBI agent.
Spiller replaced Giordanella as president and CEO of American Body Armor and led the company out of bankruptcy, through its name change to Armor Holdings and through its most rapid rate of expansion. At one stretch in the late '90s, Armor Holdings was buying an average of five companies a year.
Spiller became a high-profile figure in Jacksonville's business, social and art scenes until he was fired from Armor in 2003. No public reason was given, but Spiller received a severance payment of more than $1 million and options on hundreds of thousands of shares of company stock.
Gardner Davis, the attorney who handled the company's bankruptcy filings, called Spiller "an extremely talented and likable person. He proved to be a visionary at consolidating the public safety supply industry.
"His early investors in American Body Armor made tens of millions of dollars."
The company's stock went from a low of 18 cents a share when it emerged from bankruptcy in 1993 to $88 a share when BAE Systems bought the company in 2007.
According to his indictment, Spiller was attempting to sell rifle-mounted cameras and tactical vehicles through his own companies.
Three days after the 22 were arrested on Jan. 19, charges were announced against Bistrong.
Bistrong, Spiller and their attorneys declined to comment for this story. But Bistrong's case provides the most detail into how federal prosecutors say Armor made millions of dollars from shady dealings across the globe.
Quick study
Although Spiller's background was in the financial world, Bistrong had worked the law enforcement and military supply business before he joined Armor in the mid-1990s.
Court records show Bistrong, 47, already had a taste for the high life when he took over as Armor's vice president for international sales in 2000. His first wife accused him in divorce papers of excessive spending, despite his reported $354,000 income in 1998.
Armor's international sales products group, with offices in the United States, Great Britain and Mexico, sold military and police equipment to foreign governments. And according to federal prosecutors, it didn't take Bistrong long to figure out how to game that system.
By 2001, prosecutors contend, Bistrong and a British manager of an Armor subsidiary were bribing two United Nations officials for inside information on a contract for body armor for U.N. peacekeeping forces. The charges say Armor was awarded the contract after Bistrong's U.N. contact obtained a list of other bids from a U.N. procurement officer and instructed Bistrong to submit a signed, blank pricing sheet.
The same process repeated in 2003, federal prosecutors said.
Together, the contracts were worth $6 million, with Armor clearing a $1 million profit. Prosecutors say Bistrong and Armor paid his U.N. contacts more than $200,000.
In June 2005, Bistrong married Nancy Soderberg, a former member of the U.S. National Security Council and U.S. alternate representative to the U.N. from 1997 to 2001. But there is no indication in court documents of any connection between their relationship and the charges against him. The couple divorced in 2008.
Neither of the U.N. officials involved with Bistrong were named in the indictment, but others in the U.N. have identified them as Vladimir Kuznetsov, a diplomat who headed a U.N. budget committee, and Alexander Yakovlev, a U.N. procurement officer.
Yakovlev pleaded guilty in 2005 to conspiring to commit wire fraud after a U.N. investigation concluded he received close to $1 million in bribes.
Kuznetsov was arrested soon after Yakovlev's plea and, with Yakovlev testifying against him, he was convicted in 2007 of laundering more than $300,000 in bribes involving the Oil for Food program in Iraq. He served part of a 51-month sentence in the U.S. before being sent home to Russia to finish his term.
Yakovlev continues to await sentencing in New York. Neither of their charges mention Armor specifically.
Another scheme
At the same time as the U.N. deal, prosecutors contend Bistrong and an Armor sales consultant used a similar scheme to win a pepper spray contract with the National Police Services Agency of the Netherlands. Using a Dutch intermediary, they obtained confidential information about a bid from a Rotterdam police officer who was working on procurement for the national police agency.
The officer made sure the specifications allowed only a type of pepper spray made only by Armor, the charges say. Armor won the $2.4 million contract in 2002 with a net profit of $480,000. Bistrong and the Dutch intermediary agreed to issue a fake $15,000 invoice for "marketing services" in order to disguise the money paid to the intermediary and the officer, prosecutors said.
Federal indictments and documents also report:
- Bistrong and senior employees at Armor hid about $4.4 million in bribes from 2001 to 2006.
- In 2004, after Armor's British subsidiary was denied a license to export vests and helmets to the Kurdistan regional government in Iraq, Bistrong had the equipment shipped to the United States. He is charged with then shipping it to Kurdish representatives in the United Arab Emirates for delivery to Iraq without obtaining a license from the Commerce Department.
- In 2006, a Nigerian election official told an Armor employee he would buy Armor ink pads if he got a kickback. Federal prosecutors say Bistrong told the employee to direct the bribe to a company designated by the Nigerian official. The purchase was never made.
- Armor employees made a series of illegal exports to eight countries from Australia to Mexico. According to the U.S. Commerce Department, there were 167 violations of federal export rules from 2001 to 2004, for which Armor eventually was fined $1.1 million.
- In 2004, the U.S. Army gave Armor subsidiary Simula Inc. $266 million in sole-source contracts to build 5,900 sets of armor for trucks and heavy equipment needed in combat zones. But much of the equipment had missing or unusable pieces, like truck kits with two left doors or no nuts and bolts, according to a Defense Department inspector general report.
- BAE also paid $30 million to settle Justice Department claims that Armor knowingly sold defective Zylon bulletproof vests to federal agencies and police forces before it stopped making the vests in 2005.
Meanwhile, BAE has its own history with federal authorities and last month agreed to pay $400 million to resolve decade-old allegations that it misled the Defense and State departments about its efforts to comply with laws against bribing foreign officials.
Getting aggressive
The FBI began setting up its massive undercover probe of foreign bribery in 2007, began its sting with Bistrong in May and announced it to the world Jan. 19 with the arrests of the 22 dealers. And although it was the first undercover sting involving the Foreign Corrupt Practices Act, Howard W. Goldstein, an attorney with Fried Frank in New York, said both Justice and the Securities Exchange Commission have made it clear that the 1977 law has been a high priority in recent years.
"This is unique in that it's an undercover operation and requires a commitment of resources in a very different way and a very proactive way," he said. "It's not just a whistle blower coming forward."
Foreign business can be a fine line to walk, he said.
"The law forbids you from making a payment to a foreign official," Goldstein said. "So if a defense minister says, 'Give me $100,000,' that's pretty clear.
"But if you're dealing with a third-party representative, there's a lot of questions. Is he the defense minister's brother-in-law? Is he providing a bona fide service? If the normal fee is 2 or 3 percent and he's asking for 10 percent, you have to wonder where the other 7 percent is going."
paul.pinkham@jacksonville.com, (904) 359-4107
roger.bull@jacksonville.com, (904) 359-4296
steve.patterson@jacksonville.com, (904) 359-4263
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