Diego Union Tribune
December 4, 2005
THE CUNNINGHAM SCANDAL
Contractor 'knew how to grease the wheels'
ADCS founder spent years cultivating political contacts
By Dean Calbreath and Jerry Kammer
STAFF WRITER / COPLEY NEWS SERVICE
In government documents, he is referred to as "co-conspirator No. 1": a man who gave more than $630,000 in cash and favors to former Rep. Randy "Duke" Cunningham for help in landing millions of dollars in federal contracts.
ADCS has received at least $80 million in government contracts since 1996. Its $11 million headquarters is located in Poway.
Poway military contractor Brent Wilkes whom Justice Department officials identify as the co-conspirator has long been active in local political circles, serving as the San Diego County finance co-chairman of Gov. Arnold Schwarzenegger's campaign and the state finance co-chairman for President Bush.
Wilkes has not been charged with a crime in the Cunningham case. The former Rancho Santa Fe congressman announced his resignation Monday after pleading guilty to charges of tax evasion and conspiracy. Three other men Washington defense contractor Mitchell Wade, businessman Thomas Kontogiannis and financier John T. Michael, both of New York also have been identified as co-conspirators.
Wilkes' story shows how gifts, favors and campaign contributions can be used to gain lucrative business from the government.
Over the past 20 years, Wilkes has devoted much of his career to developing political contacts in Washington. He and his associates have spent at least $600,000 on political contributions and $1.1 million on lobbying beyond the gifts mentioned in the Cunningham plea agreement, as they cultivated such politicians as House Majority Leader Tom DeLay and Appropriations Committee Chairman Jerry Lewis.
And since 1996, he has received at least $95 million in government contracts for the small family of firms based in his $11 million headquarters in Poway, including ADCS Inc. and Group W.
Brent Wilkes, founder of ADCS Inc., is identified by officials as "co-conspirator No. 1" in the Randy "Duke" Cunningham bribery case.
Those who know Wilkes describe him as gregarious and ambitious, a person who can make friends easily and toss them aside just as quickly.
Born in San Diego County in 1954, Wilkes graduated from Hilltop High School in 1972, along with his football teammate and best friend Kyle Dustin "Dusty" Foggo, currently third-in-command at the Central Intelligence Agency. Wilkes and Foggo were roommates at San Diego State University, were best men at each other's weddings and named their sons after each other.
Wilkes' career in political relations dates to the early 1980s, shortly after Foggo joined the CIA. Foggo was sent to Honduras to work with the Contra rebels who were trying to topple the Sandinista government of Nicaragua, according to sources within the CIA.
Wilkes had moved to Washington, D.C., and opened a business named World Finance Corp. about three blocks away from the White House. One of his chief activities, sources say, was to accompany congressmen including then-Rep. Bill Lowery of San Diego, whom Wilkes met during his participation in the SDSU Young Republicans organization to Central America to meet with Foggo and Contra leaders.
A number of sources who have had business dealings with Wilkes say he hinted at that time and afterward that he was affiliated with the CIA. CIA sources say he was never employed by the agency.
By the time Wilkes returned to San Diego in the late 1980s, he had established relationships with members of the House Armed Services, Intelligence and Appropriations committees.
Neither Wilkes, Foggo nor Lowery responded to requests for comment.
By 1990, Wilkes was working for Aimco Financial Management in La Jolla. His chief duty was to bring in politicians, including Lowery, to talk to Aimco clients about how new laws might affect their finances.
Aimco ran into trouble after securities regulators accused its founder, Marvin I. Friedman, of taking $268,000 of a client's funds in 1991.
Wilkes left Aimco in 1992 to take a job as a political consultant for Audre Inc., a Rancho Bernardo firm that specialized in automated document conversion systems, which converted maps and engineering drawings into a format that could be edited via computer.
Audre, which was nearly bankrupt at the time, was eager to get more federal contracts. Shortly after Wilkes' arrival, the 35-person firm, headed by San Diego businessman Tom Casey, began donating thousands of dollars to key members of Congress.
"Wilkes was a political operator," said former Audre engineer Dirk Holland. "He was pretty slick. He knew how to grease the wheels."
Said a former business associate of Wilkes: "He knew that it pays to get a sponsor. He knew that's the way the game is played, and he convinced Tom Casey that that's what it's all about."
Union-Tribune file photo
Congressmen Duncan Hunter (left) and Randy "Duke" Cunningham, shown here before a base-closure commission hearing in June 1991, have received thousands of dollars in campaign contributions from various defense firms.
Between 1992 and 1997, Audre employees and family members donated $77,000 to members of Congress. Rep. Duncan Hunter, R-El Cajon, who got $7,250, and Cunningham, who got $5,050, became prominent backers of automated document systems in Congress.
"Our job as San Diego congressmen is to do our best to make sure our guys get a fair shot," Hunter said recently. "And Brent Wilkes and Tom Casey were aggressive and enthusiastic promoters of a breakthrough technology."
Audre was able to increase its influence by teaming up with Evergreen Information Technologies, a Colorado company that specialized in computerizing federal contract information.
Casey had been one of the founders of Evergreen in the early 1990s and served on its board of directors. Evergreen gave $22,000 in political donations, often targeting the same politicians on the same dates as Audre.
According to charges filed by the Securities and Exchange Commission, $20,000 of Evergreen's donations were illegal. Evergreen Chief Executive Barry Nelsen asked staffers to write $1,000 checks, leaving the "payee" line blank, according to SEC documents. Nelsen then gave the checks to lawmakers and repaid his workers in violation of federal law, the SEC charged in 1993.
Nelsen did not fight the charges and was fined $65,000. He says he made the donations none of which went to Hunter or Cunningham so Congress would push the Navy to work with his firm.
"I went to Tom Casey and said, 'How do we get some money or political heat or something to make the Navy do what they should do?' " Nelsen said. "So up pops Brent Wilkes."
Nelsen said Wilkes identified which politicians should be given donations.
The lobbying by Audre, as well as that of other software companies, was effective. Congress created an automated document conversion program, which provided $190 million in contracts between 1993 and 2001.
Audre won more than $12.5 million of those contracts, largely provided through earmarks that let legislators add pet projects to the budget.
"An earmark is usually devoted to a particular company or particular project that is tied to a particular congressman," said Michael Surrusco, director of ethics campaigns at Common Cause, a government watchdog group.
Earmarks are typically added to budget bills after they have been passed by the Senate and the House and the differing versions are being resolved in a conference committee. Because those meeting occur outside public view, the earmarks can be a way of avoiding scrutiny or accountability.
The earmarks were included in the budget even though the Pentagon never asked for funds for automated document conversion. In 1994, the General Accounting Office, now known as the Government Accountability Office, which monitors federal spending, found that the military did not need automated systems because it already had its own systems to digitize documents.
That did not dissuade Audre's supporters in Congress.
Tom Casey, founder of Audre Inc., a business that specialized in automated document conversion systems, hired Brent Wilkes in 1992 as a political consultant for the company.
"I operate under the idea that not all good ideas come out of the Pentagon," Hunter said.
Two dozen firms vied for funding from the automated document conversion program. Their success depended on lobbying influential legislators, said Richard Gehling, who headed Audre's federal sales in the late 1990s.
Once Congress has appropriated money for programs, Pentagon officials decide how to apportion the money among prequalified contractors. These officials are very mindful of the desires of members of Congress who were crucial in funding the program, contractors and program managers said.
Gehling described Audre's technique for obtaining government contracts during a deposition in a lawsuit he filed in 2000 to gain back pay from the company.
A successful sale to the military, he maintained, "normally boiled down to who the House or Senate member was and how much pressure they put on the undersecretary (of Defense) about getting the funding for their constituents."
Audre attorney Ian Kessler asked: "That, in turn, depends upon how much political muscle, how much influence (a company has) with a particular congressperson?"
Gehling: "The majority of the time, it's (whichever company) has the most clout."
Kessler: "You mean the most political clout?"
Gehling: "Who's paid more."
Kessler: "Paid more in terms of political contributions?"
Gehling: "Fundraisers. Sponsoring."
To build more political backing for Audre, Wilkes asked Casey in 1994 to budget at least $40,000 a month for lobbying, far beyond what the money-losing company had been spending, according to two sources at the company.
When Casey balked, Wilkes quit the firm. Six months later, Wilkes launched ADCS Inc., customizing a German system called VPMax to compete for contracts to convert government documents. It was a family affair. Most of the company's top executives were related to Wilkes or his wife, Regina.
The Pentagon rated VPMax as faster, easier and cheaper than Audre. VPMax cost $6,035 per unit, compared with $11,479 for Audre's PC system and $29,950 for its Unix system.
Even so, Hunter backed Audre, partly because it was a U.S.-made product.
"I did oppose having a German firm get the business," he said recently, although the German creator of VPMax was getting little more than licensing fees for the ADCS project.
Casey played on that sentiment. When talking to Hunter about ADCS, Casey called it "the German software." Hunter, in turn, asked Maj. Gen. John Phillips, the Pentagon's chief purchasing officer, to "whenever possible, use [document conversion] products that are made in the United States by American taxpayers."
In May 1995, just as Wilkes was launching ADCS, Hunter who had just been named chairman of the Armed Services Committee let Audre use his office for two weeks to demonstrate its newest release to Pentagon officials.
Two weeks after the demonstrations ended, Audre sold $1.2 million of the software to the military for testing.
1972 yearbook photo
Kyle Dustin "Dusty" Foggo (top), now the CIA's executive director, was a friend of Brent Wilkes' at Hilltop High School in Chula Vista.
"When you're in a position like Hunter was, you have a lot of clout, and we're not supposed to rock the boat," said a former Pentagon procurement official who declined to be named.
At that point, Wilkes started donating money to Cunningham, who sat on a House Appropriations subcommittee overseeing the Pentagon budget. Since October 1995, he and his associates have given $71,500 to Cunningham's campaign and political action committee. Cunningham became an ADCS booster.
"The success achieved by ADCS Inc. is an asset to the San Diego business and technological communities," Cunningham said in a 1997 endorsement that was printed in ADCS' pamphlets and press releases. He predicted VPMax would lead to "a stronger, more efficient national defense."
In 1996, Casey pressed Hunter to find out why the military was not buying more of Audre's software. Hunter demanded a Pentagon investigation.
A report from the Pentagon's Inspector General responded that "little demand exists" for automated document conversion systems. Aside from a Navy base in Ventura County, Port Hueneme, no military installation said it needed the systems. Much of the software Congress had funded was languishing in storage.
Such criticism did not dissuade Hunter.
According to Gehling's deposition, Hunter pushed the military to buy $2.5 million in Audre software in February 1997.
"There were still problems with the software," Gehling said. "It's always been flaky. It's still flaky."
Under pressure from Cunningham, the Pentagon shifted the money from Audre to ADCS. At the time, Cunningham said he only wanted the military to pick the best contractor possible. Donald Lundell, who was then Audre's chief executive, accused Cunningham of being swayed by Wilkes' campaign contributions.
At the time, Cunningham rejected any criticism of his actions.
"I'm on the side of the angels here," he said then, adding that anyone who questioned his role "can just go to hell."
By then, the document conversion program was drawing fire from Arizona Republican Sen. John McCain, who included it on a list of $5.5 billion "objectionable" earmarks that Congress had tacked onto the military budget.
In July 1997, McCain accused the Senate Armed Services Committee and the House National Security Committee, where both Hunter and Cunningham sat, of "virtually ignoring the request of the Pentagon and impeding the military's ability to channel resources where they are most needed."
McCain said that "with military training exercises continuing to be cut, backlogs in aircraft and ship maintenance, flying hour shortfalls, military health care underfunded by $600 million, and 11,787 service members reportedly on food stamps," Congress should not be funding "a plethora of programs not requested by the Defense Department."
McCain was largely ignored. Three months later, Congress earmarked $20 million for document conversion systems. The earmarks hit $25 million the next year, including ADCS' biggest project: a $9.7 million contract to digitize documents in the Panama Canal Zone, which was to be handed to Panama in 1999.
The idea for the project came about at a time that Hunter and Cunningham were both warning that the People's Republic of China might try to take over Panama once U.S. forces left. The project was based on the idea that the U.S. should have blueprints of public buildings in Panama in case of a Chinese takeover.
Wilkes began lobbying for the project in early 1998, targeting Rep. Robert Livingston of Louisiana, who chaired the Appropriations Committee, and Rep. Jerry Lewis of Redlands and Cunningham, who served on the subcommittee on defense.
As the Appropriations Committee earmarked the budget, Wilkes, his wife Regina, Wilkes' nephew and lobbyist Joel Combs, attorney Richard Bliss and Rollie Kimbrough, a Democrat who headed a Washington, D.C., company that partnered with ADCS on the project, contributed a total of $28,000 to the three Republican lawmakers.
The project passed without the Pentagon's support, since most of the documents in Panama had little military value. Many of the documents that were of military value already were being photocopied, faxed or scanned into computers.
But Wilkes got a contract to convert millions of documents into computer-readable format, including reams of papers that dated to the administration of President Theodore Roosevelt. By Wilkes' own description, ADCS was using its most expensive technology to scan engineering drawings from the 1870s and images of boats from the 1910s.
Louis Kratz, an assistant undersecretary of defense, tried to block funding for the project, arguing there were more pressing needs at the Army's Missile Command, the Air Force's Logistics Center and an Air Force Pacific Base project.
Kratz was rebuffed by Cunningham as well as Hunter, who wanted the Pentagon to give Audre a $3.9 million contract to perform document conversion on an Abrams tank project.
Kratz later told The Washington Post that he had never encountered such "arrogance" and "meddling" as he had from Cunningham and Wilkes. John Karpovich, who helped run the document conversion program at the Defense Department before his retirement, said Wilkes infuriated Pentagon staff by claiming that the document conversion money belonged to him.
"Brent came in and said, 'That's our money,' " Karpovich recalled. "He said, 'The congressmen put the money in there for us.' "
Kratz eventually freed the funds, delaying the Air Force and Missile Command projects. But he also asked the Inspector General to investigate how the projects got funding.
In June 2000, the Pentagon Inspector General reported that several important projects had lost funding because "two congressmen" pressured defense officials to shift the money to the Panama and Abrams tank projects. The shift in funding was causing some military officers to "lose confidence in the fairness of the selection process," the Inspector General reported.
The money from Panama and other ADCS contracts ranging from Gateway computer systems to military sound technology helped fund a heady lifestyle for Wilkes and his associates.
In 1999, Wilkes and his wife bought a $1.5 million home in the Poway hills. He soon bought a second home: a $283,500 town house in the Virginia suburbs near Washington, D.C. During his visits to Washington, he made his rounds in a chauffeur-driven Mercedes. At the Capital Grille, a favored hangout of legislators and lobbyists, he rented a personalized wine locker with his best friend Foggo.
Wilkes spread his taxpayer-provided funds throughout his company, taking executives on periodic retreats to Hawaii and Idaho.
In Honolulu, Wilkes stayed at suites at the Royal Hawaiian Hotel or rented the beachfront mansion of the late hairstyling mogul Paul Mitchell, which typically goes for $50,000 a week.
In Idaho, Wilkes' team stayed at the posh Coeur d'Alene Resort, where Wilkes paid $2,500 a night for a 2,500-square-foot penthouse suite, featuring an indoor swimming pool and outdoor Jacuzzi, said former employees and sources in Idaho.
For dinner, Wilkes would take his team to Beverley's restaurant, where a group meal could easily cost several thousand dollars. For recreation, they would fish, Jet Ski or play at the resort's exclusive golf course, famed for its 14th hole on a man-made floating island in Lake Coeur d'Alene.
There were retreats to Hawaii and Idaho at least once a year, said one source inside the company, with visits to Idaho typically occurring in spring or summer and visits to Hawaii in fall or winter.
Wilkes made no bones about where his money was coming from. His jet-black Hummer bore a license plate reading MIPR ME a reference to Military Interdepartmental Purchase Requests, which authorize funds in the Pentagon.
Wilkes shared the benefits of his largesse with the politicians who helped him. He took Cunningham on several out-of-state trips on his corporate jet. Cunningham has produced no records showing that he paid for food, lodging or transportation while traveling to resorts with Wilkes, although he does have receipts for several campaign trips on Wilkes' jet.
Wilkes also bought a small powerboat that he moored behind Cunningham's yacht, the Kelly C, at the Capital Yacht Club in Washington, D.C. The boat was available for Cunningham's use anytime Wilkes was not using it.
But what landed Wilkes in trouble with federal prosecutors was his gifts to Cunningham. According to Cunningham's plea agreement, "Co-conspirator No. 1," gave $525,000 to Cunningham on May 13, 2004, to pay off the second mortgage on Cunningham's home in Rancho Santa Fe.
Co-conspirator No. 1 also gave $100,000 to Cunningham on May 1, 2000, which went into Cunningham's personal accounts in San Diego and Washington, D.C. And he paid $11,116.50 to help pay Cunningham's mortgage on the Kelly C.
The plea agreement charged that in return for the payments, Cunningham "used his public office and took other official action to influence U.S. Department of Defense personnel to award and execute government contracts."
Wilkes befriended other legislators, too. He ran a hospitality suite, with several bedrooms, in Washington first in the Watergate Hotel and then in the Westin Grand near Capitol Hill.
He also kept his donations flowing, targeting people with clout over the Pentagon budget: $43,000 to Jerry Lewis, who now heads the Appropriations Committee; $35,500 to Hunter, who heads the Armed Services Committee; and $30,000 to Tom DeLay, who flew on Wilkes' jet several times and has been a frequent golfing buddy.
Over the past three years, Wilkes' lobbying group in Washington Group W Advisors also paid about $630,000 in lobbying fees to Alexander Strategy Group, a firm headed by DeLay's former chief of staff Ed Buckham and staffed with former DeLay employees.
The firm has a well-publicized reputation in Washington as a conduit to DeLay's office.
"The Alexander lobbyists' sales pitch was, 'Either you hire me or DeLay is going to screw you,' " an anonymous source identified as a top Republican lobbyist told the Congressional Quarterly weekly last month. "It was not really a soft sell."
Besides donating money to DeLay's campaign, Wilkes also has given money to a political action committee that DeLay helped organize: Texans for a Republican Majority. The group is under investigation for allegedly breaking Texas law to divert corporate contributions into its drive to redraw the state's election districts.
DeLay was indicted in late September over his activities with the group.
One of the group's biggest contributors was PerfectWave Technologies, one of Wilkes' companies, which donated $15,000.
House Speaker Dennis Hastert also flew on Wilkes' jet several times, sources say, although Hastert's expense records show no payments for such trips.
Besides its military work, ADCS also vied for state and municipal contracts, both for document conversion services as well as mapping systems to help speed police, firefighters and emergency workers to crime sites or fires.
As Wilkes vied for contracts, he donated to state and local politicians, such as San Diego County Supervisor Ron Roberts and Assemblyman George Plescia of Poway. The kickoff for Plescia's political campaign was held in ADCS' headquarters; Plescia was about to marry Wilkes' government affairs manager Melissa Dollaghan.
Other than Wilkes' donations to federal campaigns, his biggest contributions went to Gov. Arnold Schwarzenegger.
Besides helping coordinate the Schwarzenegger campaign's finance activities in San Diego County during the 2003 recall election, Wilkes and his wife donated $42,400 to Schwarzenegger, the maximum allowable. The next year, Wilkes allowed Schwarzenegger to use ADCS' headquarters as a local office for his 2004 workers' compensation initiative campaign.
Schwarzenegger appointed Wilkes as a board member of the Del Mar Race Track Board in 2004 and the State Race Track Leasing Commission this year.
Despite the recent negative publicity, ADCS remains in operation. At the company's glass-and-steel headquarters in Poway one day last week, about 20 cars were in the parking lot.
None of the employees would comment, and company officials shooed a reporter and a photographer away from the property.
The headquarters building was erected in 2003 at a cost of $11 million when the company was receiving a steady stream of government contracts. According to the architectural firm that built it, the building boasts a 100-seat theater, a 2,000-square-foot kitchen, and 32,000 square feet of office space, including a large sandbox lined with surfboards, which was designed to bring an element of fun into the workplace.
Sources who have worked at or done business with ADCS say the company has shrunk in size from more than 135 employees at its heyday to about 45 or fewer today. The headquarters is largely empty, the sources say.
Dean Calbreath: (619) 293-1891; email@example.com