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Developer Helped Congressman By Buying Boat, Arranging Loan

By Charles R. Babcock
Washington Post Staff Writer
Tuesday, July 5, 2005

Thomas T. Kontogiannis, a Long Island developer, says he doesn't particularly like politics, so he never does business with the federal government. Still, he hit it off with Rep. Randy "Duke" Cunningham years ago, and recently Kontogiannis bought Cunningham's 65-foot yacht, the Kelly C, and helped the California Republican finance a house.

The developer says the transactions are nothing like Cunningham's dealings on another house and yacht that are the subject of a federal investigation. A federal grand jury is examining Cunningham's relationship with Mitchell J. Wade, a Washington defense contractor who bought a home from Cunningham, possibly at an inflated price, and then let the congressman stay rent-free on Wade's 42-foot boat, the Duke-Stir, while in Washington.

The transactions between the congressman and Kontogiannis are not fully documented in the public record or the congressman's financial disclosure. Cunningham, for example, is still listed as the owner of the Kelly C, with his address listed as the home he bought more than a year after Kontogiannis said he bought the yacht from the congressman.

Kontogiannis, of Glen Head, N.Y., said in interviews this weekend that he bought the Kelly C, a boat on which Cunningham used to live while Congress was in session, for $600,000 in summer 2002. Kontogiannis spent $100,000 more redecorating it the next year at the Glen Cove marina but didn't use it except for dockside parties, he said, because it wasn't stable in rough seas. Kontogiannis said he never got around to changing the title on the boat from Cunningham's name to his.

Then in late 2003, Kontogiannis said, when Cunningham bought a $2.55 million home in Rancho Santa Fe, the congressman asked if a mortgage company owned by Kontogiannis's nephew and daughter could finance $1.1 million in mortgages. The congressman bought that house shortly after Wade paid $1.675 million for Cunningham's previous home in Del Mar. Wade then sold that house for a $700,000 loss.

Kontogiannis said he recently paid off a $500,000 second mortgage on the Rancho Santa Fe home at the congressman's request, mostly with money he owed Cunningham for the yacht.

There is no mention of Kontogiannis's debt to Cunningham on the congressman's financial disclosure statements.

Cunningham's lawyers, K. Lee Blalack II and Mark Holscher, said in a written statement that the congressman's "business dealings with Mr. Kontogiannis have been entirely proper."

Cunningham called and visited the Long Island marina a month ago -- before news stories about Wade appeared -- to arrange for repairs so he could take the Kelly C back to Washington.

Kontogiannis, 56, said he had discussed reselling the Kelly C to Cunningham but decided against it. The source close to Cunningham said the congressman registered the boat this year using his new California address in anticipation of the resale. But that idea was jettisoned when San Diego area newspapers broke stories about the congressman's dealings with Wade.

The developer said his failure to record the change in title on the boat should not be taken as a sign that he was doing Cunningham a favor by paying for refurbishing his boat. "Why would I do that?" he said. "I don't need the man." Kontogiannis said he has never asked Cunningham for a favor.

The developer pleaded guilty to what he said was a misdemeanor state fraud charge in 2002 in connection with alleged bribes to a local school superintendent in return for $6 million in computer contracts. He said he agreed to pay $5 million in reimbursement.

Kontogiannis, who said he served in the Greek navy before coming to the United States in 1970, said he met Cunningham at a Washington function about 15 years ago. They talk a couple of times a year, he said. Cunningham was a Navy fighter pilot and an instructor at its Top Gun flight school.

Kontogiannis said he went to a party on the Kelly C around 1995, when it was owned by another congressman, and liked the steel-hull craft. After Cunningham bought it 1997, for a reported $200,000, Kontogiannis said he told the congressman: "If you ever decide to sell it, I'd love to buy it."

Cunningham "called and asked if I was still interested" in buying the boat, Kontogiannis said. He did so, he said, after getting the boat appraised at $1.2 million. The developer said he financed the transaction by giving the congressman about $30,000, assuming the payments on an existing $140,000 bank loan and financing the remaining $425,000 as a personal note that accumulated interest at the prime rate. He said a family company, Axxion LLC, made the payments on the bank loan.

The congressman approached him again in 2003 when Cunningham planned to buy the Rancho Santa Fe home, Kontogiannis said. The congressman asked if Coastal Capital, the company the developer said is owned by his nephew and daughter, could finance the mortgage at its wholesale price, which had a slightly lower interest rate than retail mortgage lenders. The decision was "a slam dunk," Kontogiannis said, because the house had been appraised at $2.55 million.

Kontogiannis said Cunningham asked him last year to pay back the Kelly C loan, which was accruing interest at about 3 1/2 percent, by paying off the second mortgage on the house. Interest on the congressman's loan was accruing at 10 percent, though Cunningham wasn't making payments, he said.

The developer paid off the mortgage, he said, after Cunningham wrote him a check for $70,000 to make up the difference between what he owed on the boat and what Cunningham owed on the second mortgage.

As of late June, land records in California did not show the congressman had paid off the second mortgage. "I sent him a letter of satisfaction" in March, Kontogiannis said. "It's up to him to get it recorded."

Staff researchers Alice Crites, Madonna Lebling and Meg Smith contributed to this report.

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