The U.S. attorney in San Diego is trying to seize Rep. Randy "Duke" Cunningham's California home, asserting in a sealed civil suit that it was purchased with proceeds from a violation of the bribery statute.
The reference to the federal bribery law in a forfeiture claim filed in court and with San Diego County is the first official indication of the direction of a probe of the California Republican's relationship with a Washington defense contractor.
A federal grand jury has been investigating Cunningham since the San Diego Union-Tribune reported in June that the contractor, Mitchell J. Wade, had purchased the congressman's home in late 2003 for $1.675 million and resold it several months later at a $700,000 loss. Cunningham soon bought a larger house in Rancho Santa Fe for $2.55 million.
Cunningham also lived rent free while in Washington on Wade's 42-foot yacht, the Duke-Stir.
The 15-year congressman, a longtime member of the House subcommittee that oversees the Pentagon's budget, has acknowledged backing classified military intelligence programs for which Wade's company, MZM Inc., had contracts.
Cunningham has said he did nothing wrong, and prosecutors have not commented on exactly what they are investigating. Under federal law, bribing a public official is punishable with 15 years in prison, while a lesser charge of providing an official with a gratuity carries a two-year sentence.
The congressman announced last month that he will not run for reelection, and that he will sell the new home. He put it on the market on Wednesday, asking $3.5 million, according to the Union-Tribune.
The U.S. attorney's office in San Diego filed the claim against Cunningham's house on July 21. It is called a lis pendens and is similar to a lien. The object of the pending secret civil suit is forfeiture, the claim said, because the property "is derived from proceeds traceable to" a violation of the federal bribery law.
Such forfeiture filings are not unusual in criminal investigations, but they are usually filed in open court. For example, the government publicly filed a civil forfeiture action in Washington last fall against a former Riggs Bank executive, asserting that he had used the proceeds of a kickback scheme to buy land.
Richard M. Scrushy, the former head of HealthSouth Corp., went through a lengthy hearing in 2003 before he was indicted on fraud and other charges to determine whether securities regulators could freeze his assets. A judge ruled in Scrushy's favor, and he was later acquitted of the criminal charges.
Cunningham's attorneys went to federal court in San Diego last week to challenge the sealed claim. "No federal court has ever authorized the government to cloud title to real property based on secret civil forfeiture allegations that are not disclosed to the people who hold lawful title to the property," they said in court documents.
"The U.S. Attorney's office seeks to freeze Cunningham's principal asset, without ever having to litigate the validity of the freeze, while endeavoring to construct a criminal case against Duke Cunningham," the court papers said. A hearing on the matter is scheduled for Sept. 9.
Cunningham's attorneys also said that it is unfair to seek forfeiture of the home because the congressman's wife, Nancy, who is not believed to be under investigation, is co-owner and would be deprived of her property.
The court papers said that the Cunninghams recently made an offer on a $749,000 home in the La Costa section of Carlsbad, Calif. Though that offer was rejected, the couple still wants to move into a similarly priced home and leave the Rancho Santa Fe property, which has been appraised at $3.3 million, the filing said.
Henry Asbill, a Washington lawyer, said filing the forfeiture suit under seal is a sign of the aggressive approach prosecutors are taking in white-collar crime and political-corruption cases. "It is part and parcel of a disturbing trend to treat white-collar defendants like members of organized crime," he said. He added that the government probably filed the forfeiture suit secretly because it has not indicted Cunningham and does not want to give away evidence in the civil proceeding.