The MZM money machine

When defense contractor Mitchell Wade’s corrupt relationship with Randy “Duke” Cunningham was exposed in 2005, Robert McKeon saw opportunity.

McKeon heads Veritas Capital, a New York private equity firm that buys defense contractors, and Wade’s company MZM Inc. looked like a good candidate for acquisition. The company was in distress, but it also had potentially lucrative intelligence contracts and more than 300 employees with Top Secret and above security clearances.

In September 2005, Veritas bought MZM for a “full price” of around $20 million, according to BusinessWeek. The deal was swiftly approved. “Veritas is profiting from the spoils of congressional bribes,” Keith Ashdown of Taxpayers for Common Sense complained, to no avail.

So how has Veritas done on its investment? Quite well.

By getting rid of Wade and keeping 94 percent of his old firm’s contracts, Veritas unlocked MZM’s revenue stream. In its first fiscal year of operation under new management, the company — renamed Athena Innovative Solutions — posted more than $100 million in sales.Athena also boosted the size of the workforce and acquired three small Virginia companies, including Business Defense and Security Corp.

In September 2007, two years after acquiring MZM, Veritas sold Wade’s old company for $200 million to CACI Inc. For those keeping score at home, that’s an annualized return of 900 percent. 

(Update: Veritas also employs former Gen. Barry McCaffrey, which has gotten them in some trouble.)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s