Model lighting / shading
This model is composed of quads. Each quad is formed by a pattern of edges more or less like the latitude and longitudinal lines on a globe. That pattern of concentric rings of edges are called edge loops.
Notice on the model (such as it is), the areas with greater detail have edges that are close together. Look around the eyes, nose, and mouth. Notice that these edge loops that are close together form 'creases' in the vertex shading. Edge loops that are close together can give the appearance of creases depending on the shape of the surface.
To down model those edge loops, what you want to do is decrease the detail in that area. Hopefully that will smooth out the lighting. So, if there are three edge loops in that area, you can try getting rid of one or two of them by merging the vertices. You can also try spreading them out. Tighter Geometry = more severe crease.
After doing that normal stuff (recalculate, hard soft edge), see if the problem still exists in the same severity in a render that incorporates your pixel shaders.
I should say that these crease happen only around soft edges, usually where the geometry is forming a corner or a curve. Thinking about it, making a hard edge where the vest meets the shoulder should probably get rid of most of that distortion.