Diego Union Tribune
June 28, 2005
Firm in 'Duke' controversy may be sold
By Marcus Stern
COPLEY NEWS SERVICE
WASHINGTON – The beleaguered defense contractor ensnared in controversy over its founder's dealings with Rep. Randy "Duke" Cunningham has given the company's reins to a former general whose mission is to sell it, sources said last night.
In a move that left the few employees who had learned of it in shock, MZM Inc. founder Mitchell Wade selected James King, one of his longest-serving and closest associates, to be the company's president and chief executive officer.
King, who retired from the Army as a three-star general, notified a few employees last night that his mandate was to find a buyer for the company, which has signed more than $110 million in federal contracts since 2002.
A source close to Wade said he is selling the company to preserve the jobs of the several hundred people it employs.
The move continues a corporate roller-coaster ride for the embattled MZM that began June 12 when the Union-Tribune disclosed that Wade had purchased and sold Cunningham's Del Mar-area house at a $700,000 loss.
It was later revealed that Wade has allowed the Rancho Santa Fe Republican to live aboard his yacht in Washington.
After those revelations, Wade selected Frank Bragg, MZM's chief operating officer, to replace him as CEO and president. But Friday evening, Bragg abruptly left the Washington-based company.
Kay Cole James, MZM's senior executive vice president for national security transformation, also resigned on Friday. She had only joined the company last month.
President Bush appointed James director of the U.S. Office of Personnel Management in 2001, and she previously worked in federal posts during the administrations of Presidents George H.W. Bush and Ronald Reagan.
Several lower-level MZM employees also resigned Friday.
Wade had been quietly planning to sell the company as early as next year to its employees through an Employee Stock Ownership Plan, or ESOP, according to several close or former associates.
It was unclear last night whether the accelerated timetable was a result of the controversy surrounding Wade's ties to Cunningham or resulted from other factors.
Wade had anticipated making $100 million on the company's sale, according to the sources, a goal that appears less likely now.
Word of the resignations, King's ascension and the plans to sell the company comes from current and former employees who spoke on the condition of anonymity, either because they are still with the company or are working in the military or intelligence fields.
All have expressed concerns about the way Wade has run the company.
Those concerns have increased in recent weeks after the disclosure of the home sale and Cunningham's use of a 42-foot yacht that Wade purchased, renamed the Duke-Stir and then placed in Cunningham's slip at the Capitol Yacht Club. Cunningham said last week that he paid the slip fees and maintenance costs for the vessel.
Wade purchased the boat in August 2002 for $140,000 and officially changed its name to the Duke-Stir – an apparent play on Cunningham's nickname – in January 2003, according to U.S. Coast Guard records.
Bragg, James and King did not respond to a reporter's messages yesterday.
An FBI inquiry and a federal grand jury investigation are under way into the questions surrounding Cunningham's ties to Wade and MZM.
Cunningham has said he supported funding requests benefiting MZM, but insisted that he does not have the authority, even as a member of the influential House defense appropriations subcommittee and Permanent Select Committee on Intelligence, to "secure" contracts.
MZM, which incorporated in 1993, had few contracts until 2003. That year, MZM was awarded a five-year, $250 million blanket-purchase agreement with the General Services Administration that paved the way for a surge in contracts.
In the past three years, MZM has accumulated more than $110 million in military intelligence contracts. During the surge, MZM hired aggressively, with some employees reporting they were offered dramatic pay increases to join the company.
Some of those employees expressed dismay last night when they learned that Bragg and James had resigned and King had become CEO.
As they communicated with one another by e-mail and telephone, the most common reaction was shock, according to a former employee who said employees had been rocked by the alleged irregularities between Cunningham and Wade, but felt things would be fine – until Bragg and James resigned.
While Wade abandoned his titles of CEO and president in the past two weeks, he remains the principal shareholder of the privately held company.
Marcus Stern can be reached at firstname.lastname@example.org