Michael Milken Junk bond investor pleaded guilty to securities violations in fraud inquiry

The man whose software trademark dispute has spawned a corruption investigation of Gov. Jim Gibbons has said that convicted junk bond king Michael Milken was a significant investor in a company for which Gibbons helped secure government contracts in his work as member of Congress.

The Review-Journal confirmed that Reno software developer Dennis Montgomery, 53, said during prior court proceedings that Milken invested as much as $12 million in Reno-based eTreppid Technologies LLC.

Montgomery said his business partner, Warren Trepp, told him Milken was going to purchase 5 percent of the company.

Trepp denies ever making the comments, and his attorney said Montgomery's claims are false and that Milken was not an investor in eTreppid.

But even if Milken, a felon, was associated with eTreppid, regulations probably would not have prevented the company from doing business with the government. Milken was the target of a massive fraud inquiry that resulted in his pleading guilty to securities violations.

"In general ... the (rules say) the government would not deal with a contractor convicted of fraud," said Neal Fox, a former Air Force official who now offers consulting services to businesses seeking contracts with the government.

"If it's investors, it becomes a much more murky situation," Fox said. "If it is not one of the top officers of the company, then generally the government isn't interested."

ETreppid, a software research and development company, was co-founded by Trepp and Montgomery in late 1998.

The U.S. Department of Defense and other related government agencies subsequently awarded millions in government contracts to eTreppid for use of its visual recognition software in the war on terror.

The business relationship between Trepp and Montgomery turned sour in late 2005 when Montgomery claimed that software he developed while employed by eTreppid belongs to him.

Trepp claims he owns the codes in question.

In parts of Montgomery's lawsuit that remain sealed, Montgomery says Trepp used his longtime friendship with Gibbons, then a Republican congressman, to get the contracts in exchange for lavish gifts and cash, according to reports in the Wall Street Journal.

Gibbons and his wife joined the Trepps on an ocean cruise in 2005 that was not disclosed to the House of Representatives.

The FBI is investigating Gibbons' involvement in the Trepp contracts.

Milken and Trepp's links to one another are extensive and have been well-documented. Trepp was Milken's chief bond trader in New York in the 1980s at the time of one of America's greatest economic scandals, the bond market collapse.

Prior media accounts document how Trepp sat at an L-shaped desk to the right of Milken as Milken pioneered the American bond industry at the investment bank Drexel Burnham Lambert.

Milken relied on junk bonds for acquisitions and corporate financing, making him one of the nation's wealthiest men.

In 1989, he was charged by a federal grand jury, and he ultimately spent nearly two years in prison on securities violations.

Trepp's work at Drexel was also the subject of an extensive review by federal investigators after the bond market faltered, but Trepp was never charged with any crime in his work at Drexel.

In the mid-1990s, Trepp was the subject of a U.S. Securities and Exchange Commission administrative proceeding looking into allegations of the manipulation of bond transactions. After a lengthy legal battle, the proceedings were dismissed.

Still, Montgomery has told court officials in the eTreppid litigation that Milken and Trepp have remained in touch.

The newspaper has confirmed that Montgomery has also said the L-shaped desk from Drexel is at eTreppid headquarters, and that Montgomery said he once saw Milken on the property of the Reno business.

One of Trepp's attorneys, J. Stephen Peek, said when the case is litigated in court, it will become apparent that Montgomery's representations cannot be relied upon.

Montgomery's attorney, Michael Flynn, wouldn't comment for this story.

Milken's spokesman, Geoffrey Moore, said Monday he couldn't answer the question of whether Milken ever invested in eTreppid, because Milken doesn't publicly disclose his private investments.

"What I can tell you is that Mike has investments in hundreds, perhaps thousands, of companies around the world," Moore said.

"Although I don't know the exact circumstances of this particular matter, we've sometimes found people claiming that Mike was an investor in this or that company just to attract investors."

Since his release from prison, Milken has embarked on an extensive philanthropic mission and has given large sums of money to multiple charitable endeavors.

For example, in 1993, Milken was diagnosed with prostate cancer, and he subsequently founded the Prostate Cancer Foundation, which has become the world's largest private sponsor of prostate cancer research.

His Web site also disputes many prior portrayals of his activities at Drexel and his resulting legal problems.

"He admitted conduct that resulted -- during a brief period in his 20 years on Wall Street -- in five violations," the Web site says.

"Although such conduct had never before (or since) been prosecuted criminally, he resolved the case without a trial to prevent further impact on his family. After paying a $200 million fine and serving a one-year-and-10-month sentence, he resumed his philanthropic work. Milken has promised that he will someday write his side of the controversy to correct a record that has so often been distorted by inaccurate media reports."