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)

Cunningham requested that $7.5 million be set aside for MZM's program and made it his first priority, according to his office's internal chart, which prosecutors filed as an exhibit. The House approved the earmark in June, and it passed Congress as part of the defense appropriations bill in October, though at a slightly reduced level.

The GSA officials who approved MZM's application to join its schedule were supposed to ensure that the hourly labor rates Wade charged were "fair and reasonable." They were, however, higher than some other contractors from the region offering the same types of services, according to labor rates published by the GSA.

According to several sources inside and outside the company, including some former employees, Wade attracted staff by offering tens of thousands of dollars more than the going salary. The sources agreed to speak only on condition of anonymity because of the sensitivity of the subject. As his company grew, he hired people like retired Army Lt. Gen. James King, who held several high positions at Pentagon intelligence agencies and now runs Athena Innovative Solutions Inc., MZM's successor company. Wade also hired David Holmes, a former CIA lawyer; John Quattrocki, a high-ranking FBI officer; and Kay Coles James, the former head of the Bush administration's Office of Personnel Management.

The blanket purchase agreement, signed with a Defense Department contracting office in September of 2002, was written so broadly that any agency inside or outside the Pentagon could order a wide variety of help. It seemed crafted for the Bush administration's post-Sept. 11 push for more defense and intelligence spending. It referred to homeland security, law enforcement planning, geospatial integration, document exploitation and what is called MASINT, for measurement and signature intelligence.

The Defense Information Systems Agency refused to answer questions about how it selected MZM. But it announced last summer, after Wade's relationship with Cunningham was exposed, that it was cutting off further work. It said it realized Wade's company was the only one that responded to its initial request, when federal regulations required three bidders.

To ensure that MZM "could milk that account without interruption or interference" from the Defense Department officials who oversaw the contract, Wade enticed them with personal favors, the government said in court documents filed along with Wade's guilty plea. He hired the son of one Defense Department official at the Army's National Ground Intelligence Center in Charlottesville in early 2002, when MZM was still a subcontractor. In return, the official gave MZM inside information and favorable performance reviews ensuring further work, prosecutors alleged.

The matter is still under investigation.

The first order under the blanket agreement was in October 2002, a $193,281 order to do a "concept report" of a computer system in Charlottesville. Wade apparently felt so confident of his company's future with the ground intelligence center that he opened an office nearby.

The next order, in late January 2003, was much larger, though the client for the $6.1 million contract isn't clear from sketchy descriptions released under the Freedom of Information Act. A few weeks later, MZM got an order for $12.7 million.

Two days after the war in Iraq started, MZM won a $1.2 million contract to provide interpreters for "post conflict" work. And in March, Wade's company got a $6.2 million contract, this one with the Pentagon's new Counter Intelligence Field Activity. In fiscal 2003, MZM got a total of $38.6 million in orders through the blanket purchase agreement.

That climbed to $65 million, then $60 million in the following two years, as Cunningham continued to add earmarks to make more money available for programs Wade worked on, and the contractor continued his bribes for the congressman. Those included the use of a 42-foot yacht renamed the Duke-Stir, a used Rolls Royce, more antiques and the purchase of his home in San Diego for $700,000 more than it was worth -- even a check for $115,100 to pay the capital gains on Cunningham's inflated profit on the home sale.

As MZM's revenue soared, so did Wade's personal spending. He and his second wife owned a $3 million house in Kalorama. He took his staff on outings to the Greenbrier resort and Bermuda. He started the Sure Foundation, named after a Christian verse, to help children around the world who were victims of war and unrest.

The global war on terror was good for business. There was lots of work at the National Ground Intelligence Center and the Counterintelligence Field Activity. The Pentagon called on MZM to help seek counters to roadside bombs in Iraq. The Special Operations Command in Tampa needed help too. And thanks to an earmark from Rep. Virgil H. Goode Jr. (R-Va.), MZM was picked to run a Foreign Supplier Assessment Center in Martinsville, Va., to check out foreign-based contractors.

Last July, a month after the San Diego Union-Tribune triggered the investigation by disclosing the home sale, the Pentagon was still telling Cunningham's office that money was in the pipeline for his latest MZM earmarks.

Staff researchers Alice Crites, Madonna Lebling and Meg Smith and staff writer R. Jeffrey Smith contributed to this story.