Grand Jury Demands Lawmaker's Documents

By Renae Merle and Jeffrey H. Birnbaum
Washington Post Staff Writers
Wednesday, June 29, 2005

A federal grand jury in Southern California has subpoenaed documents from Rep. Randy "Duke" Cunningham, his lawyer said yesterday in a written statement. Prosecutors have been examining the congressman's relationship with Mitchell J. Wade, the owner of District-based defense contractor MZM Inc.

In 2003, Wade bought the California Republican's home near San Diego for $1.675 million. He later resold it for a $700,000 loss. For the past year, Cunningham has been living rent-free while in Washington on a 42-foot yacht owned by Wade.

The congressman, a member of the House Appropriations Committee's defense subcommittee, said last week that he showed "poor judgment" in his dealings with Wade but that he had done nothing wrong. He said he supported funding intelligence programs but gave no preferential treatment to MZM.

"My client has directed me to comply with the subpoena as expeditiously as possible and he has instructed his staff to cooperate with these document requests," Cunningham's attorney, K. Lee Blalack, said in the statement. It did not describe what kinds of documents the grand jury sought. Blalack didn't return a call seeking further details.

Meanwhile, MZM announced yesterday that retired Lt. Gen. James C. King would take over as chief executive and president of the firm and indicated that it is considering a sale or merger. A statement said the company is "exploring strategic alternatives." It did not mention Wade or address the controversy.

King told workers yesterday that his primary mission is to protect the company's assets in preparation for its sale, according to two former employees told of the discussions who spoke on condition of anonymity.

A sale "would not be our first course of action per se, but it is one of the things we're looking at," said Scotty Brumett, an MZM spokesman. "We're looking at many different things."

The firm's management has been in flux in recent weeks. Wade stepped aside earlier this month because of the investigation and was replaced by Frank Bragg Jr. and Kay Coles James, who served as chief executive and chief operating officer, respectively. Bragg, who previously served as MZM's chief operating officer, and James, the former director of the Office of Personnel Management, "voluntarily resigned," the statement said.

Bragg did not return messages left at his home, and James could not be reached.

King's appointment "marks the completion of a transition in the corporate management," the statement said. He will have "sole executive authority over the management and operations of the company." Before joining MZM, King was director of the National Imagery and Mapping Agency, now known as the National Geospatial-Intelligence Agency.

MZM specializes in defense and intelligence contracting and had about $60 million in revenue last year. In recent years, the firm's largest source of revenue has been a type of contract called a blanket purchase agreement, with the Defense Information Systems Agency, an arm of the Pentagon. The company has collected contracts worth $163 million over the past 2 1/2 years under the agreement, with work that included developing political strategy and helping government agencies gain "geospatial awareness," according to government procurement records.

Last week, DISA prohibited the company from being awarded new work under the agreement, though it can complete ongoing tasks. In a statement, the agency said the Pentagon inspector general recommended recently in a preliminary audit that the agreement be canceled, saying it did not meet standards for a competitive award because of a change in procurement law in late 2002.

DISA invited MZM and another firm to bid on the work before the rule went into effect, the statement said. Wade's company was the only one to respond, which was permitted to be counted as competitive then. But the rule change required three bidders on such work, so DISA modified MZM's contract.

Similar agreements with two other companies that had been awarded before the rule change also were canceled, the statement said.

Staff writer R. Jeffrey Smith and staff researcher Meg Smith contributed to this report.

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