A Contractor's Purchase on Power

Randy "Duke" Cunningham earmarked millions in defense contracts for MZM Inc. in exchange for a variety of bribes, including extravagant gifts. (By Sandy Huffaker -- Getty Images)
By Charles R. Babcock and Renae Merle
Washington Post Staff Writers
Monday, March 20, 2006

The consulting work that MZM Inc. received from a Pentagon agency in 2003 was for only $40,000, but to company owner Mitchell J. Wade, the face value was just the beginning.

Over the following year, the work grew to $4 million as MZM added employees that the government had not asked for; pressed successfully for the agreement to be on a "time and materials" basis so it could bill for hours worked; and left the impression that Wade could pull strings, if necessary, to get his way.

According to excerpts of e-mails collected by a Pentagon employee and provided to The Washington Post, one contract official inaccurately thought Wade was a former undersecretary of defense. Another wrote that "Mitch Wade is a force to be reckonned (sic) with . . . he has a lot of perceived power that can slow us down . . . maybe even grind us to a halt."

The recent corruption conviction of former congressman Randy "Duke" Cunningham -- and Wade's recent guilty plea for bribing him -- focused attention on Congress's practice of "earmarking," or setting aside, federal money for favored interests.

A review of the rise and fall of Wade and his company, based on interviews and MZM and government documents, shows that bribing Cunningham was only one part of Wade's formula for success. His firm, which had no prime federal contracts in fiscal 2002, collected more than $170 million over the next three years, thanks not just to Cunningham, but also to Wade's ability to take practices common among government contractors and push them to the limit.

In a tight labor market, he paid well above the going rate for workers with security clearances -- wages that left others in the government contracting industry puzzled. He freely distributed title and rank, appointing more than 100 vice presidents, executive vice presidents and "senior executive vice presidents" in a company of about 400 people. He aggressively used the "revolving door" between the government's defense and intelligence bureaucracy and the private industry, attracting top talent and often sending new hires back to work on contracts at their former agencies and to try to cultivate new business.

MZM was able as the sole bidder to win a "blanket purchase agreement" for up to $225 million over five years in Pentagon technology work, though procurement regulations require at least three competitive bids.

Kenneth L. Wainstein, U.S. attorney for the District, said after Wade's guilty plea that the agreement amounted to "a $225 million blank check drawn on taxpayer funds."

Cunningham admitted accepting at least $2.4 million from Wade and three other men over the past several years in return for official favors, including steering money for contracts their way. The California Republican was sentenced to eight years and four months in prison earlier this month. That was a week after Wade pleaded guilty to four felony counts for his role in the case. MZM was sold last summer to a New York investment firm, which changed its name but kept many of its contracts and people.

Wade, who declined an interview request through his lawyer, had learned the intricacies of the procurement system from the inside. He was a civilian worker at the Pentagon, working at times on classified programs, from the mid-1980s to the early 1990s. He then became a consultant to Brent Wilkes, a San Diego defense contractor who was so close to Cunningham that competitors complained the congressman was giving Wilkes's company favored treatment. In the following years, Wade supplanted Wilkes as Cunningham's favorite, and Wilkes -- who has been implicated but not charged in the scandal -- ended up as an MZM subcontractor.

Wade first bribed Cunningham on Nov. 16, 2001, according to prosecutors' court papers. That Friday, barely two months after the terrorist attacks on New York and Washington, the contractor bought the congressman $12,000 worth of antiques, and Cunningham told Wade that he would make him "somebody." At the time, the government filings said, MZM had contracts of less than $1 million a year.

Their partnership became apparent early the next year as Wade requested a $15 million earmark for a counterintelligence program. He was also working at the time to get on the General Services Administration's schedule of companies authorized to seek federal business, a prelude to the broader intelligence-related "blanket purchase agreement" he pursued that summer and fall.

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