By Charles R. Babcock
Washington Post Staff Writer
Tuesday, February 21, 2006
In the fall of 2003, Randy Beck, the president of a small San Diego manufacturing company, showed a new acoustics technology he was developing to his neighbor, defense contractor Brent Wilkes. Wilkes soon came back with an unusual proposition.
Wilkes said that Congress had set aside or "earmarked" $25 million in the military budget for the Navy to develop an acoustical system. He promised he could win the government contract to develop the system for Beck's Horizon Sports Technologies, according to allegations in a lawsuit. In return, Wilkes wanted $1.5 million up front to cover his lobbying expenses and a 51 percent interest in a new company they would set up to collect the government cash.
Wilkes's dealings with Beck -- outlined in court records after a falling-out -- provide insight into how one businessman set out to exploit the Washington system of earmarking -- the practice of members of Congress setting aside pots of money for pet projects. That practice, involving billions of dollars annually, is vulnerable to abuse because much of the lobbying and decision making takes place behind closed doors, according to critics. And Wilkes, who has been implicated in the bribery-related conviction of resigned Rep. Randy "Duke" Cunningham (R-Calif.), pushed the limits of that system.
Although it is common for lobbying firms to charge clients large fees to pursue earmarks, Wilkes's demand for a majority interest in the resulting contract is highly unusual, experts said. "It has a strong, bad odor about it," said Kenneth A. Gross, a Washington lawyer who specializes in ethics law. He said many states, including California, have banned such contingency, or success, fees, though there is no federal prohibition.
"My client did nothing inappropriate or illegal in trying to obtain funding for his clients' projects," said Wilkes's attorney, Michael Lipman of San Diego.
Wilkes was an obscure California contractor and lobbyist until his name surfaced last year as one of two defense contractors alleged to have given Cunningham $2.4 million in cash and other benefits in return for Cunningham's steering government business their way. One of Wilkes's companies received more than $80 million in Pentagon contracts over the past decade that stemmed from earmarks that Cunningham slipped into spending bills.
Although he has not been charged in the case, Wilkes's attorney has confirmed that he is the "co-conspirator" identified in the federal charging documents who allegedly made $625,000 in illegal payments to benefit Cunningham in 2000 and 2004. Prosecutors say the investigation is continuing.
Wilkes, 51, grew up in San Diego and graduated from San Diego State in 1977 after studying accounting. He worked in Washington in the 1980s but did not make his first federal political donation until 1991. Wilkes then went to work for a Southern California software company that was seeking federal contracts for converting paper documents to digital ones.
In 1995, Wilkes started a competing business, ADCS Inc., which stood for "automated document conversion systems." With Cunningham's help, he began winning contracts from the Pentagon.
He snared a $1 million Pentagon contract in 1997, which Cunningham proclaimed "an asset" to San Diego. In 1999, ADCS was awarded a $9.7 million contract to convert documents in Panama. Subsequently, the company began collecting more than $20 million a year in defense business.
As his business grew, Wilkes bought new homes in San Diego and Northern Virginia, started a charitable foundation and built an $11 million headquarters for his privately owned company. The San Diego Union-Tribune reported that he took expensive vacations to Hawaii and Idaho, and treated his staff and congressional friends to meals in fancy restaurants.
Defense officials asked the inspector general in 1999 to review the program because they were bothered by the aggressive style of Wilkes and Cunningham in seeking additional earmarks for ADCS.
Business was so good for Wilkes that he allegedly gave Cunningham $100,000 in 2000, according to the former congressman's recent plea agreement. And the following year he expanded his business by setting up his own lobbying firm, Group W Advisors, in the Washington suburbs, to pursue earmarks.
He became an active supporter of leading House Republicans and began flying Cunningham and several others around on a corporate jet. As he cultivated new political friends, he became less dependent on Cunningham to win him earmarks.
For example, in June 2002, Wilkes and an associate, Max Gelwix, established PerfectWave Technologies LLC, which was trying to perfect a way to delete background noise from radio communications. According to a knowledgeable source, Wilkes held a 51 percent interest in the company, as became his practice.
A month later, Wilkes hired the Alexander Strategy Group, a lobby shop run by former aides of then-House Majority Leader Tom DeLay (R-Tex.). Wilkes, Gelwix and their wives and associates then began donating to DeLay, Rep. Roy Blunt (R-Mo.) and Rep. John T. Doolittle (R-Calif.), a member of the Appropriations Committee, among others.
They donated more than $85,000 to Doolittle's campaign and political action committee between 2002 and 2005. Doolittle acknowledged to The Washington Post recently that he sponsored earmarks, totaling $37 million, in defense funding bills for PerfectWave Technologies, beginning in 2002. Wilkes divested his majority interest in PerfectWave late last year after the Cunningham charges and his role in them became public.
Wilkes's pitch for seeking earmarks and a partnership with his neighbor Beck is outlined in a lawsuit filed by Beck's Horizon Sports last year. Wilkes's pledge of snaring the $25 million Navy contract soon led to other promises, according to the suit, with Wilkes saying he could get Beck part of another $25 million earmark for energy-efficient vehicles.
By early 2004, Beck's group had wired $1.2 million to Wilkes while Group W had registered to lobby for two newly created companies, according to the lawsuit. Wilkes suggested the names -- Acoustical Communications Systems for the Navy project, and Optimum Composite Design, for the energy-efficient vehicle.
But the relationship soon soured. Horizon Sports complained in its breach-of-contract suit that Wilkes did not deliver on his promise of big cash from Congress. Only a single earmark for $1 million was included in the fiscal 2005 defense appropriations bill for "advanced shipboard acoustical communications," a term for Beck's technology. Wilkes and his companies insisted that they lived up to their contracts with Beck, and the case was settled out of court last fall. Neither side will discuss the details because of a confidentiality agreement.
In a court filing Friday, prosecutors in the Cunningham case said that in May 2004 the congressman demanded that Wilkes give $525,000 to pay off a second mortgage on Cunningham's new home in Rancho Santa Fe. Wilkes agreed, the document said, on the condition he receive an additional $6 million in government funding, which he did through a Pentagon subcontract.
Last year, Group W registered to lobby for another new company, Pure Aqua Technologies, in another partnership deal. According to a paper circulated at an industry trade show in Hawaii in late 2004, Pure Aqua was created by Wilkes's ADCS Inc. and Pure-O-Tech Inc. of Escondido, Calif. The company makes water purification technologies, including one to treat contamination from percolates, an oxidizer in rocket fuel and explosives.
In mid-2004, $3 million in funding that was not requested by the Bush administration was added to the fiscal 2005 defense appropriations bill in the House. The measure was cut to $1.5 million when it reached a House-Senate conference committee. An additional $2.7 million for the specific technology Pure-O-Tech used was added to the Pentagon appropriation in the House committee last June but did not survive in the final bill.
Can Sirin, Pure-O-Tech's president, said in a recent interview that Wilkes "assisted us in getting earmarked money through a congressman, which we were grateful for." He recalled that the earmark was for $1.5 million and said the description in the fiscal 2005 conference report matched his technology. But he said he could not remember which congressman sponsored it and was not aware of a second attempt to earmark $2.7 million.
His company discussed an equal partnership arrangement with Wilkes, he said. But Sirin said he ended the talks when Wilkes's relationship with Cunningham surfaced last summer.
"We just didn't need that," he said.