Force Protection ( FRPT) sure seemed to get its act together after hiring a consulting firm with ties to its CEO.

The defense contractor, which makes blast-resistant vehicles for the military, was a real mess just a few short years ago. Back then, the company was still losing money and searching for a viable business strategy.

Only after tapping Gordon McGilton as its CEO in 2005 -- and spending half a million dollars on his firm's leadership training program in the year that followed -- did the company seem to stabilize.

McGilton's firm, known as APT Leadership, sounds far from routine. McGilton's partner there, Heero Hacquebord, claims he learned his skills from none other than W. Edwards Deming, "the man who re-engineered Japan." On his Web site, Hacquebord also claims to have "pioneered the Statistical Thinking Courses in the USA" two decades ago.

Last fiscal year, for a total of $563,120, APT Leadership provided Force Protection with consulting services, training seminars and business software. It also sold the company a license, costing $50,000 annually, for use of its diagrams and such.

Force Protection Vice President Mike Aldrich credits ATP Leadership for some of the company's recent success. But critics question the company's investment -- and seem worried about its future -- nonetheless.

"Why the need for this leadership training?" asks David Phillips, an investment specialist known as the 10Q Detective. "The company is selling armored vehicles -- not burgers."

Historical Problems

To be fair, APT Leadership seemed to have its work cut out for it when it came to Force Protection. Just take a look at that company's history.

Five years ago, Force Protection -- then known as Sonic Jet Performance -- was boasting about its international reach after landing a deal to sell its boats in Russia. By the time it filed its annual report, however, the company was referring to 2002 as "a year of restructuring" and shifting away from the recreational boat business altogether. After acquiring Technical Solutions Group, a maker of blast-resistant vehicles, the company had decided to specialize in "products that save lives" instead.

In 2005, after bidding adieu to a CEO who was beset by a tax dispute, the company engineered a 1-for-12 reverse stock split in an effort to boost the shares and attract more investor interest. It also welcomed some new help in the executive suite.

Scott Ervin, a lawyer and board member, stepped in as interim CEO. Ervin then tapped industry veteran Ted McQuinn as president of operations.

McGilton, hired around that time as the company's chief quality officer, took over as permanent CEO a couple of months later.

During 2006, his first full year as CEO, McGilton scored $420,000 in cash, 300,000 shares of stock and 1 million stock options -- with a strike price of just 72 cents a share -- for his service to the company. He had picked up a jet boat as an added bonus the previous year.

Aldrich says that Force Protection supplied the boat to McGilton, a collector of vehicles, as payment for past services provided to the company by APT Leadership. But the perk has raised some eyebrows.

"This 'in kind' compensation was for work performed by Mr. McGilton as an independent contractor during 2001 and 2002 -- three years earlier?" notes Phillips, who has no position in the company's stock. "And it is not like McGilton could not afford to buy a new boat."

Revolving Door

By then, with McGilton firmly in charge, other executives had started to flee.

Garth Barrett, the chief technology officer who helped start the company, left in August 2005. Tom Thebes resigned as CFO two months later. In response, the versatile Ervin switched hats once again, stepping in as acting CFO -- a position that he continues to hold some 15 months later.

In April 2006, McQuinn quit after 14 months on the job. But the company, which originally welcomed him as a crucial addition, downplayed that departure.

"We are pleased with the progress we've made under Ted in the past year," McGilton announced just days after McQuinn resigned. But "Ted's departure will have really no effect on the continuity of the senior executive team which has been responsible for our dramatic growth."

By most accounts, however, the company's senior management team -- with McGilton ranking as a veteran -- looks somewhat fresh even today.

"The management team has been together for a short period of time," C.E. Unterberg Towbin analyst James McIlree acknowledged in an otherwise bullish note on the company earlier this month. "And while it has been successful responding to the urgent operational needs of its customers, it has yet to test itself in the more arcane and intensively competitive budgeting process."

McIlree has a buy recommendation and a $25 price target on Force Protection's stock. His firm has investment banking ties to the company.

Selling Spree

By now, Force Protection's real veteran -- Chairman Frank Kavanaugh -- has managed to strike it rich.

Force Protection was basically insolvent when Kavanaugh arrived on the scene in 2001. He changed the company's strategy in 2002 and moved into the executive suite the following year, serving as vice president of business development.

In the spring of 2005, with McGilton installed as CEO, Kavanaugh stepped out of the way and settled into his current role as nonexecutive chairman. Kavanaugh displayed his faith in the company by purchasing stock, at prices between $1.70 and $3.24 a share, over the course of the next year.

Then Kavanaugh started cashing out. Since September, Kavanaugh has pocketed nearly $35 million by selling Force Protection stock.

Aldrich says he's "not aware of any negative company news, either present or pending," that might have sparked those transactions. But Phillips sounded worried shortly after the insider selling spree began.

"When Force Protection insiders register to dump sell on the market, or have already sold hand over fist -- a combined 23.5% of the common stock float in the last 10 weeks -- this raises an ominous red flag," Phillips wrote in mid-October. "In our view, the common stock of Force Protection is Newton's apple: almost ready to fall from the tree."

As it turns out, gravity took its time. Shares of Force Protection continued to soar for the next few months, approaching McIlree's $25 price target during their final day on the bulletin board. It was only after moving to the more liquid Nasdaq that the shares finally lost some steam and started drifting back toward Earth. Shares rose 90 cents Thursday to $20.66.

Massachusetts investment strategist Peter Cohan wonders whether the fun is over.

"I think the company has already gotten its return on investment from that leadership training," jokes Cohan, who has no position in the stock. "Now it will actually have to come up with some new sources of business to accelerate the stock. ... But to me, it seems like the easy money has already been made."

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