San Diego Union Tribune

February 25, 2006

Contractor admits bribing Cunningham
Wade, who bought congressman's house, pleads guilty to conspiracy

By Finlay Lewis,
Jerry Kammer
and Joe Cantlupe

WASHINGTON – Defense contractor Mitchell Wade pleaded guilty in federal court yesterday to conspiring to funnel more than $1 million in bribes to former Rep. Randy “Duke” Cunningham and making illegal campaign contributions to two other members of Congress.

While not named in the plea agreement, the two representatives are identifiable through campaign finance records as Republican Reps. Virgil Goode of Virginia and Katherine Harris of Florida. Neither has been accused of criminal wrongdoing.

Wade, the founder and former president of MZM Inc., also admitted to conspiring with an official of the Army's National Ground Intelligence Center in Charlottesville, Va., to defraud the Defense Department.

Mitchell Wade, 46, is facing up to 11 years in prison.


One count of conspiracy to commit bribery

One count of using interstate facilities to promote bribery

One count of conspiring to deprive the Defense Department of the honest services of its employees

One count of election fraud
As part of the scheme, Wade hired the official's son in February 2002. He did so under an arrangement in which MZM was reimbursed for the son's employment from Pentagon funds committed to a document-scanning program, according to a prosecution document.

Later, Wade also hired the official, identified as William S. Rich Jr.

Rich “left work on a Friday and the next Tuesday he was back in the NGIC building as an MZM employee,” recalled a former government employee at the center.

Wade, dressed in a gray suit, choked up briefly yesterday as he read a statement in court expressing remorse and acknowledging his cooperation with federal investigators.

“I feel deep sorrow for the harm I've caused to my family, friends and former colleagues,” Wade, 46, told U.S. District Court Judge Ricardo Urbina.

Wade's purchase of Cunningham's Del Mar-area house figured prominently in the former congressman's own guilty plea in the fall. Wade bought Cunningham's house for $1.675 million in November 2003 and then sold it eight months later at a $700,000 loss.

The businessman began providing information to the government shortly after the tainted sale of Cunningham's house was disclosed in a Copley News Service story published June 12 in The San Diego Union-Tribune.

Wade is one of four co-conspirators named in the plea agreement and sentencing memorandum for Cunningham. The other co-conspirators are Brent Wilkes, owner of Poway-based ADCS Inc.; Thomas Kontogiannis, a Long Island, N.Y., developer; and John Michael, the nephew of Kontogiannis' wife and president of a Long Island mortgage company.

Wade pleaded guilty to two counts of conspiracy and single counts of election fraud and using interstate facilities to promote bribery. He faces a prison sentence of up to 11 years. No sentencing date was set.

Among the myriad actions designed to curry favor with Cunningham, the prosecution documents describe Wade's purchase of the Del Mar-area home at an inflated price, a payment of $13,500 to Cunningham for the purchase of a Rolls-Royce, a $140,000 payment for a yacht – renamed the Duke-Stir – that was made available to the congressman “for his use and enjoyment,” and a $7,200 payment to an antique store for two 19th-century commodes, a type of chest of drawers.

In the second conspiracy count, prosecutors said Wade plotted with Rich and “other (Defense Department) employees” to carry out wire fraud to fatten MZM's coffers.

The plea agreement states that Rich opened the door for Washington-based MZM to obtain projects funded under a broad purchasing agreement. The official also submitted a favorable performance evaluation of the firm seven months after Wade hired his son.

Another portion of the plea agreement describes how Wade sent a $115,100 check via Federal Express made payable to Top Gun Enterprises, Cunningham' military memorabilia business. The check was intended to cover Cunningham's capital gains taxes on the sale of his Del Mar-area home, but Wade attempted to pass it off as a legitimate business expense on MZM's corporate books.

Cunningham endorsed the check and deposited it, according to a prosecution sentencing memo filed in San Diego.

The transaction ran afoul of a law prohibiting the use of interstate “facilities to promote bribery.”

Another count described the $80,000 in illegal campaign contributions to Goode and Harris.

Wade circumvented a federal campaign law that restricts an individual to gifts of $2,000 per election. His ploy involved giving employees $2,000 in cash and then asking them to make contributions to the candidates, prosecutors said.

The prosecution document said Wade did not inform either lawmaker or their aides that the contributions were illegal.

The figures cited in the documents, which only covered a one-year period, understate the total contributions Goode and Harris received from Wade, MZM employees and their spouses.

In the aftermath of the scandal, Goode has donated to charity more than $90,000 in campaign contributions linked to MZM. He did so after a campaign finance watchdog group – Citizens for Responsibility and Ethics in Washington – and others called on him to return the money.

MZM's PAC gave Harris $10,000 during the 2004 election cycle. MZM officials and their family members gave Harris an additional $44,000 during the same period.

In one instance cited in the court documents, Wade asked Goode for funding for an MZM facility that resulted in a $9 million appropriation earmarked for that purpose.

Wade's efforts fueled MZM's dramatic growth as the company won more than $150 million in Defense Department contracts beginning in 2002. Wade secured the contracts in part by exploiting a Defense Department procurement process known as a blanket-purchase agreement.

Blanket-purchase agreements are vaguely worded contracts designed to give agencies flexibility and to speed purchases. Contractors are screened and pre-qualified, and agencies are able to obtain supplies and service on an as-needed basis. But critics contend that the open-ended contracts allow agencies to skirt public oversight. The arrangement enabled MZM to receive up to $225 million in Pentagon funding while avoiding the competitive bidding process.

At a news conference after yesterday's court session, U.S. Attorney Kenneth Wainstein summarized Wade's rise and fall.

“From the outside, MZM Inc. appeared to be an American success story,” he said. But he noted that Wade's accomplishments were based on fraud rather than honest work.

“He did it by spreading corruption within the congressional appropriations process, the defense contracting apparatus and the financing of congressional campaigns,” Wainstein said.

Wainstein added that Cunningham, as a member of the powerful House defense appropriations subcommittee, “had the power to make or break” a fledgling company like MZM.

“Wade quickly identified Cunningham as a congressman who could be bought and he proceeded to do exactly that,” he said.

In San Diego, U.S. Attorney Carol Lam declared: “Mitchell Wade bought a Congressman, and he enjoyed the fruits of his extensive bribery. Today, the consequences of his acts are brought home in his plea agreement with our office and the U.S. Attorney's Office in Washington, D.C.”

Wade severed his ties to MZM after stories in the Union-Tribune disclosed his financial dealings with Cunningham.

Yesterday's court proceedings occurred a few blocks from the Capital Grille restaurant, where federal prosecutors said that Wade, Wilkes and other defense contractors routinely and lavishly entertained the Republican lawmaker.

Cunningham, an ace fighter pilot during the Vietnam War who was elected to Congress in 1990, pleaded guilty Nov. 28 to tax evasion, honest-services fraud and conspiracy to commit bribery and announced his resignation from office.

Cunningham is scheduled to be sentenced Friday. Prosecutors – who have called Cunningham's acceptance of more than $2.4 million in bribes “unparalleled corruption” – are recommending the maximum 10-year sentence.

Staff writer Onell R. Soto contributed to this report.

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