The San Diego Union-Tribune

June 22, 2005

Workers say MZM founder pressed them to give to PAC

By Marcus Stern

WASHINGTON – Mitchell Wade, founder of the defense contracting firm MZM Inc., pressured employees to donate to a political fund that benefited Rep. Randy "Duke" Cunningham and other members of Congress, according to three former employees of the company.

Wade, who took a $700,000 loss on the purchase of Cunningham's Del Mar home and allows the congressman to stay on his yacht while in Washington, demanded employees make donations to the company's political action committee, MZM PAC, they said.

"By the spring of '02, Mitch was twisting employees' arms to donate to his MZM PAC," said one former employee. "We were called in and told basically either donate to the MZM PAC or we would be fired."

Many companies have PACs, but campaign finance laws prohibit employers from pressuring workers to contribute to the PAC. They may encourage contributions, but not compel them.

"It is illegal to solicit campaign contributions for the company's political action committee by the use of threats, force or threat of job reprisal," said Larry Noble, former general counsel of the Federal Election Commission and currently director of the Center for Responsive Politics, a nonpartisan organization that tracks the flow of money in politics.

"If they say to somebody, 'You either give or you are going to be fired,' they have violated the law," Noble said.

MZM officials did not respond to requests for comment. In the past week, Wade resigned the posts of president and chief executive officer of the company, turning over those duties to Chief Operating Officer Frank Bragg, company sources said. Wade remains the primary shareholder of the privately held, Nevada-licensed company, sources added.

The resignations came after the Union-Tribune reported that Wade had purchased and then sold Cunningham's Del Mar house at a loss of $700,000 and has allowed the Rancho Santa Fe Republican to stay aboard his yacht, called the Duke-Stir, while in the nation's capital. The FBI and a federal grand jury are investigating the matter.

Since the initial disclosure of the 2003 home sale, Cunningham has released only two brief statements on his ties to Wade, saying that the home sale was "aboveboard" and that he has paid an undisclosed amount for use of the yacht.

Wade has made no public comment since his ties to Cunningham were first reported.

Wade operates out of the company headquarters, a four-story townhouse in the Dupont Circle area of Washington. About 20 to 25 employees work in the building, according to the former employees. They say the company has grown to more than 400 employees, with much of the expansion coming in the past two years.

Little public information exists on what MZM – a name based on the first names of Wade's children Matthew, Zachary and Morgan – does for the government. Former employees, however, say much of its work is with three defense intelligence operations:

Counter Intelligence Field Activity, a highly secretive program created in 2002 by a Pentagon directive that focuses on gathering intelligence to avert attacks like the ones on Sept. 11, 2001.

The Army National Ground Intelligence Center in Charlottesville, Va., whose mission is to provide soldiers with battlefield intelligence.

The U.S. Army Intelligence and Security Command at Ft. Belvoir, Va., just outside Washington, which also provides battlefield intelligence.

MZM has been seeking to increase its contracts with the Central Command, which oversees military operations in Iraq and Afghanistan, and the Special Operations Command, both based at MacDill Air Force Base in Tampa, Fla., according to former employees.

The three former MZM employees who said Wade pressured them and others to donate money to the company PAC declined to be identified, saying they feared for their careers if their names were disclosed. All continue to work in the military and intelligence fields.

They and other former MZM employees questioned the way Wade solicited contracts from Defense Department intelligence agencies during the time they worked for the company.

They also expressed concerns about Wade's dealings with three House members who received a large portion of the money disbursed by MZM's PAC. The three – all Republicans – are Cunningham and Reps. Virgil Goode of Virginia and Katherine Harris of Florida.

MZM's PAC donated $17,000 to Cunningham from 2000 to 2004. Donations included $12,000 to "Friends of Duke Cunningham" and $5,000 to his leadership PAC, the American Prosperity PAC. During the same period, MZM PAC gave Goode $11,000 and Harris $10,000.

Neither Goode's nor Harris' offices returned calls seeking comment.

Many companies form PACs to raise and spend money to help elect or defeat political candidates. Individuals also may contribute separately. PACs are not allowed to give more than $5,000 to any one candidate per election. When a primary and general election are involved, PACs may give $5,000 per candidate in each, for a total of $10,000 per election cycle. Individuals may give up to $4,000 per election cycle.

In addition to the MZM PAC, MZM officials also made contributions to the House members' campaigns. Wade gave Cunningham $6,000 between 2000 and 2004.

MZM officials and their family members gave Harris, who ran for Congress in 2002, a total of $44,000 during 2003 and 2004. Goode received a total of $27,851 between 2000 and 2004.

MZM senior employees and family members gave Goode an additional $44,625 in March, according to information compiled by the Center for Responsive Politics.

MZM has a facility in Goode's rural Virginia district, not far from the Army National Ground Intelligence Center, which is one of MZM's key customers.

MZM is also planning to buy a facility in Harris' district, where it can be close to two of its other customers, the U.S. Central Command and the Special Operations Command, which are in a neighboring congressional district.

Cunningham is on the Permanent Select Committee on Intelligence and the defense appropriations subcommittee, which puts him in position to influence the awarding of defense intelligence contracts.

MZM had 56 such contracts totaling $68,645,909 in fiscal year 2004, according to Keith Ashdown, an analyst with Taxpayers for Common Sense. One of those contracts is to provide interpreters in Iraq. For the most part, the contracts were awarded to MZM without competition through a process known as "blanket purchase agreements."

Ashdown echoed the comments of former MZM employees in saying Wade strategically targeted MZM's donations.

"A lot of people will throw a lot of money at a lot of different people," Ashdown said. Wade's "strategy was, 'I need to make friends with a few very influential lawmakers and really, really schmooze and coddle them and that's how I'm going to make my money.' And that's what he did.

"The first person is Cunningham, a senior guy on the (defense appropriations) committee, and he helps them get business. Then they go to another guy on the (defense appropriations) committee, Goode, who's more junior but has the benefit of getting a facility in his district. And then they go to Katherine Harris, who isn't on the committee but needs lots of money for her Senate race and would be bringing business and new jobs to her area," Ashdown said.

Harris plans to run for Senate next year.

One of the former MZM employees quoted Wade as describing his congressional strategy this way: "The only people I want to work with are people I give checks to. I own them."

Another former employee said Wade used letters to remind employees before their employment anniversaries to contribute a designated amount to the company PAC. The specific amount was based on their level of seniority in the company, with more senior officials expected to give $1,000 each and less senior employees expected to give $500, the former official said.

A third former employee described being rounded up along with other employees one afternoon in the company's Washington headquarters and told to write a check, with the political recipient standing by. The former employee wouldn't give the name of the politician receiving the donations.

"When (employers) solicit contributions to the political action committee, they are supposed to say that the contribution is voluntary," said Noble, the former general counsel of the Federal Elections Commission. "They are allowed to suggest an amount to give, but they have to say you can give more or less, or nothing at all.

"And they have to say that there will be no job reprisals for not giving. So even being silent on it and soliciting contributions is, actually, technically a violation of the law."

Citizens for Responsibility and Ethics in Washington, a group with ties to the Democratic Party, lodged a complaint yesterday with the Federal Election Commission after a Copley News Service story posted on the Union-Tribune's Web site – – disclosed the allegations that Wade had pressured employees to contribute to MZM PAC.

Copley News Service correspondent Jerry Kammer contributed to this report.

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