View Full Version : Cunningham Pleads Guilty To Conspiring To Take Bribes, Income Tax Evasion

11-28-2005, 03:20 PM
Cunningham pleads guilty to conspiring to take bribes, income tax evasion


By Gregory Alan Gross, Debbi Farr Baker and Karen Kucher
9:56 a.m. November 28, 2005

SAN DIEGO – Rep. Randy "Duke" Cunningham pleaded guilty Monday morning to conspiring to take bribes in exchange for using his influence to help a defense contractor get business.

He also pleaded guilty to one count of income tax evasion.

U.S. District Larry A. Burns scheduled Cunninghman's sentencing for Feb. 27.

Cunningham, an eight-term Republican congressman, had been under scrutiny for months for his ties to defense contractors and their officials.

Federal officials launched investigations after The San Diego Union-Tribune and Copley News Service reported in June that a defense contractor who won tens of millions of dollars in Pentagon contracts had taken a $700,000 loss after purchasing Cunningham's Del Mar house.

Cunningham sold the house for $1.675 million in November 2003, but the buyer, defense contractor Mitchell Wade, never moved in and almost immediately put it back on the market. Wade sold it 261 days later for $975,000.

Prosecutors contend the overpayment was a bribe.

The congressman, who sits on the House defense appropriations subcommittee, used the proceeds of the sale to buy a $2.55 million house in Rancho Santa Fe, which he has since put up for sale.

Cunningham, a former Navy Top Gun pilot, was first elected to Congress in 1990. The 63-year-old Republican represents a district that stretches from northern San Diego to Escondido and San Marcos and then along the coast from Carlsbad to Del Mar. He has vowed not to seek reelection and plans to retire next year, at the end of his term.

His attorney, K. Lee Blalack, said Cunningham would speak to reporters outside the downtown San Diego Federal Court building at 11:30 a.m.

Cunningham had insisted the real estate deal was independent of his efforts to help Wade win contracts. Wade's company saw its business soar over the past three years after it won an open-ended blanket-purchase agreement with the government.

Cunningham initially downplayed his friendship with Wade, saying it was no different than his relationship with other CEOs.

But then, 11 days after the story broke, Cunningham released a three-page statement to reporters in which he acknowledged he and Wade had been friends for many years and said that he had showed "poor judgment" in the real estate transaction.

As weeks passed, more revelations emerged and the FBI and a federal grand jury launched probes into Cunningham's financial dealings.

News reports revealed that Wade provided Cunningham the use of his 42-foot yacht, which was named Duke-Stir, to live aboard on the Potomac when Cunningham was in Washington. Cunningham said he paid dock fees and some maintenance costs for the boat.

It was then disclosed that Cunningham made roughly a $400,000 profit by selling a boat he lived on from 1997 to 2002 to a businessman convicted in a bid-rigging scheme.

The Long Island businessman who bought the Kelly C from Cunningham for $627,000 also said a mortgage company owned by his relatives loaned money to Cunningham for two real estate transactions. The businessman, Thomas Kontogiannis, said he paid off one of those loans as partial payment for the Kelly C purchase.

Kontogiannis said Cunningham offered to help him explore the possibility of a presidential pardon and recommended two or three lawyers to talk to, but he never pursued the pardon.

Cunningham's relationship with a second defense contractor, ADCS Inc., also came under scrutiny.

In mid-August, federal regulators seized documents from ADCS's Poway headquarters and raided company president Brent Wilkes' home. Wade formerly worked for ADCS in the Washington, D.C. area.

Like MZM, ADCS won millions of dollars worth of government contracts while making significant donations to Cunningham and other members of the defense subcommittee. ADCS, or Automated Document Conversion Systems, specializes in scanning documents so they can easily be indexed and cross-referenced.

The subcommittee repeatedly penciled in funding for projects involving the company, even though the Pentagon had not requested the money.

Since 1997, Wilkes and other ADCS insiders contributed more than $600,000to political campaigns, mostly giving funds to members of the Appropriations and Armed Services committees. Cunningham and his American Prosperity politicalaction committee received $53,500 in donations.

The Union-Tribune reported in early August that Cunningham alsorepeatedly used ADCS' corporate jet on campaign-related trips, including ahunting trip in Idaho and a golf tournament in Hawaii. House MajorityLeader Tom DeLay also flew on the jet.

Cunningham said he paid for those flights.

On July 14, Cunningham held a news conference to announce he would not seek a ninth term.

"I fully recognize that I showed poor judgment when I sold my home in DelMar to a friend who did business with the government," Cunningham told reporters. "I should have given more thought to how such a transaction might look to those who don't know me. I have spent an entire life building a reputation of integrity and trust. It pains me beyond words that I have jeopardized your trust."

Cunningham also told reporters that he planned to sell his Rancho Santa Fe house and give a portion of the profit to three local charities.

But government lawyers moved to block the sale a week later, filing a secret lawsuit that claimed Cunningham had bought the home with money obtained through bribery. Lawyers also put a notice in county property records advising potential buyers that the government intended to try to seize the property.

Cunningham's attorney went to court in early September to ask the legal warning be removed from the home, but a federal judge rejected the request. The attorney said the warning is scaring off potential buyers.

The investigation has also affected MZM, a company which has undergone major changes since the first stories broke.

MZM's business began to take off three years ago when it wasdesignated the sole contractor for certain types of Army intelligenceprograms.

Under the agreement, MZM became an exclusive contractor for the DefenseInformation Systems Agency, enabling the agency to order services from MZM. Its five-year contract with the Department of Defense was structured asan open-ended blanket-purchase agreement, with a $250 million spendinglimit.

Since 2002, MZM received $163 million in federal contracts, primarily for Pentagon programs. Much of MZM's services under the agreement involved classified work on intelligence programs for the U.S. Army.

Wade, the founder of MZM, resigned as president in late June.

In a move officials said was unrelated to the Cunningham flap, the government announced in late June it no longer would allow federal agencies to buy from MZM under the sole contractor program.

In August, MZM was sold to a private equity firm.

Cunningham's use of a third boat also came under scrutiny. The Union-Tribune and Copley News Service reported that Brent Wilkes, the Poway defense contractor whose home and offices were raided in August by federal agents, allowed Cunningham use of a 14½ -foot fiberglass boat several years ago when it was docked near Cunningham's yacht in Washington, D.C.

Critics contended it represented another example of the favors that some businessmen offered Cunningham and of his willingness to accept their offers. But Cunningham's attorney, K. Lee Blalack, said Cunningham simply accepted an offer to use the boat periodically.