washingtonpost.com
Agents Search Homes, Yacht Of Contractor, Congressman

By Renae Merle and R. Jeffrey Smith
Washington Post Staff Writers
Saturday, July 2, 2005

Federal agents armed with search warrants descended on the California house of Rep. Randy "Duke" Cunningham yesterday, the latest step in a criminal investigation into his relationship with the owner of a District-based government contracting firm.

Agents from the FBI, Internal Revenue Service and Defense Criminal Investigative Service of the Pentagon inspector general's office participated in the search of Cunningham's house near San Diego, as well as the Washington home, office and boat of Mitchell J. Wade. Wade was until recently the chief executive of MZM Inc., which does intelligence work for the Pentagon.

Cunningham, a California Republican who was a fighter pilot in Vietnam and an instructor at the Navy's Top Gun school, is a member of the House Intelligence Committee and defense appropriations subcommittee.

The investigation began three weeks ago after news reports that Wade had purchased Cunningham's home in late 2003 for $1.675 million and then sold it months later at a $700,000 loss. Cunningham also was living rent-free on Wade's 42-foot yacht at the Capital Yacht Club on the Potomac River. But he has not stayed on the yacht for about two weeks, according to a source close to the congressman.

Cunningham acknowledged last week that he showed "poor judgment" in selling his house to Wade but denied he had improperly helped MZM obtain government contracts to work on intelligence programs.

Cunningham's lawyers, K. Lee Blalack II and Mark Holscher, issued a statement calling the search of Cunningham's home in Rancho Santa Fe "an appalling abuse of government power" because the congressman agreed Monday to cooperate with a federal grand jury subpoena seeking essentially the same documents.

"They will apparently not take yes for an answer and have instead opted to use strong arm tactics that were designed to generate headlines," the lawyers said.

In Washington, around 10 a.m., more than a dozen federal agents entered the headquarters of MZM, a secure white brick building on New Hampshire Avenue NW, and ushered employees into the reception area, according to one person who was there but spoke on the condition of anonymity. The agents took the names and phone numbers of the 15 to 20 employees before allowing them to leave, then did not allow anyone to reenter, the source said.

Agents also searched Wade's Kalorama home and the yacht the contracting executive bought in late 2002 and soon renamed Duke-Stir, apparently after the congressman.

In an unsigned statement, MZM said that it was cooperating with the investigation and that its legal counsel, Steptoe & Johnson LLP, had been in contact with authorities.

"The search warrant process will not impede the ability of MZM's more than four hundred employees to continue to carry out critical national security support missions for our government," the statement said.

Attorneys at Wilmer Cutler Pickering Hale and Dorr LLP who represent Wade declined to comment.

The search warrants were executed at the company's headquarters two weeks to the day after an MZM official who worked closely with Wade shredded a large stack of documents on the third floor of MZM's Washington headquarters, two sources with knowledge of the incident said independently yesterday. They said the official destroyed the documents on June 17 in a waist-high machine during Wade's final hours in the office, an act that one source described as "weird" because of the timing.

Wade and his attorneys agreed the previous evening that he would surrender control of the company to other senior MZM officials, and they also agreed that he could pack up his office papers at a set time on June 17, one of the sources said. But Wade angered the firm's new managers by arriving earlier than agreed, according to this source. Both sources said he was in the building when the shredding occurred.

The nature of the destroyed documents could not be learned, and the executive who did the shredding did not reply to phone calls and e-mails seeking his comment. The shredding was halted when it became apparent to the new company managers, the sources said. Another senior MZM official affixed a note to the door in mid-morning that day, ordering employees of the company not to enter the room where the machine was located, they added. Wade was eventually permitted to take other documents from the building in boxes, under the supervision of company attorneys, the sources said.

The sources spoke on the condition that they not be named because of the sensitivity of the matter.

The Navy says Wade entered the Naval Reserve in November 1987 and the Individual Ready Reserve in 1996. He resigned his commission in 1999. He reached the rank of lieutenant commander. Wade was a program manager at the office of the assistant secretary of defense for command, communications and intelligence from 1991 to 1993, according to his entry in Who's Who.

Wade started MZM in 1993, but it did not begin to grow until it was awarded a broadly written contract, called a blanket purchase order, in fall 2002. It did more than $163 million in work for a variety of Pentagon agencies until the Defense Information Systems Agency cut off new work orders 11 days ago, saying the inspector general's office ruled that the work was not competitively awarded.

Federal procurement records show one of MZM's first contracts was a $140,000 deal to provide office furniture to the Executive Office of President. In 2003, the Pentagon hired the firm to provide linguists in Iraq.

According to news reports, some former and current MZM employees have complained that they were pressured to contribute to the company's political action committee, which could be illegal. The PAC and MZM employees contributed $50,000 to the 2004 campaign of Rep. Katherine Harris (R-Fla.), according to the Center for Responsive Politics, which monitors campaign spending.

Harris sent a letter to MZM employees this week, offering to return contributions if they were "pressured, overtly or tacitly, in making this gesture." According to Adam Goodman, Harris's campaign consultant, the letter was prompted by the news reports and the congresswoman had not been contacted by federal investigators.

Staff Writer Jeffrey H. Birnbaum contributed to this report.

© 2005 The Washington Post Company