Tom McMillen's Slam Dunk

The main institutional investor in Fortress America is Paladin Homeland Security Fund, a $235 million investment fund established by Paladin Capital, a Washington-area private equity firm that's led by a number of executives with ties to the defense and intelligence communities. Two of Paladin's principals include former Central Intelligence Agency Director R. James Woolsey and former National Security Agency Director Lt. General Kenneth Minihan.

In March, the Paladin fund paid $7,000 to purchase 50,000 shares of the company in a pre-IPO financing deal that raised $25,000. In that same deal, Nickles and Hutchinson each acquired 200,000 shares at a bargain-basement price of 1.4 cents each. McMillen and Fortress America CEO Harvey Weiss each acquired 575,000 shares in the same private transaction.

It's not clear whether Fortress America has any specific security company in mind to acquire. The registration statement for the IPO offers a broad description of the type of business it will pursue, saying it will focus on a company with "solutions for the commercial private sector and government."

Weiss, Fortress America's CEO, declined to comment, citing the pending registration statement.

The Securities and Exchange Commission calls ventures such as Fortress America, which don't have any actual operations and exist solely to initiate a merger, "blank check" companies. Blank check companies aren't unusual, but the SEC's Web site warns investors that such companies "typically involve speculative investments" and should be treated with the same degree of risk as any other penny stock.

Indeed, Fortress America doesn't intend to list its shares on a major market such as the New York Stock Exchange or the Nasdaq Stock Market. Rather, its shares will be bought and sold on the OTC Bulletin Board, one of the two main markets for trading penny stocks. The underwriter on the deal is Sunrise Securities, a small New York investment bank that specializes in providing financing for small-cap companies.