McMillen Brings Big Names To New Venture

The company's plan is to become, in effect, a publicly traded corporate buyout fund, known in the investment trade as a special purpose acquisition company, or SPAC.

When you invest in a SPAC you're buying the experience and merger-and-acquisition acumen of the executives involved, and you're betting on their ability to put together a real company with your investment.

SPACs are part of a broader category designated under Delaware law as "blank check" companies. Critics have said it's an apt name: In the 1980s, before the SEC toughened the rules for blank check companies, they were a favorite of penny stock promoters and were often associated with investment scams.

For all the risk, blank check companies can result in a substantial payoff for early investors -- if the companies invest well.

"They are for institutional, sophisticated investors," said Tim Halter of Halter Financial Group Inc., a New York firm that works with blank check companies.

Nationally, about a dozen SPACs are in registration or have sold stock in IPOs in the past year, according to a review of SEC filings. Most are raising capital for acquisitions of private companies in targeted industries -- health care, technology, industrial products, media and entertainment -- using both cash and their publicly traded stock as currency.

Fortress America's chief executive is Harvey L. Weiss . For two years until August, Weiss was chief executive of New York security software firm System Detection Inc . He has spent most of the past 35 years in executive roles at prominent information technology and network security firms.

Hutchinson is a former congressman who until recently ran the Homeland Security Department's border patrol and transportation security operations. An Arkansas Republican, he has announced he will run for governor of that state in 2006. Nickles, 56, retired from the Senate last year after 24 years and is now a Washington lobbyist. Fortress America's other outside director is David J. Mitchell , 43, who is a partner with McMillen in a "leveraged fund" called M&M Advisors .

McMillen and the other officers, directors and advisors of Fortress America can anticipate a big payout if the company succeeds.

On March 9, six key players bought a total of 1.75 million shares of stock in the company for 14 cents a share. Among the buyers were McMillen's Washington Capital Advisors, Weiss, Mitchell, Hutchinson and Nickles. The Paladin Homeland Security Fund , a Washington venture capital and buyout fund established last year by former Democratic Party operative Michael R. Steed , bought about 50,000 shares.

The 14-cent shares bought by Paladin and by Fortress America's organizers are being held in escrow but can be sold at the market price after three years, or whenever the company is sold or dissolved.

In its IPO, Fortress America is offering units, at $6 each, that provide one share of common stock plus warrants to buy two shares at $5 each. The warrants can't be exercised until the company merges with an operating company.