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Congressman Sold Home -- and Could Pay Dearly

Rep. Cunningham faces criminal probes after a high-price sale to a military contractor.

June 23, 2005|Tony Perry | Times Staff Writer

SAN DIEGO — On display at the Aerospace Museum in Balboa Park is one of the F-4 Phantoms that made Randy "Duke" Cunningham famous and propelled him into national politics.

Twenty miles up Interstate 5 is the house in upscale Del Mar Heights that threatens to scuttle his political career and result in criminal charges after eight terms as a Republican member of the House of Representatives.

Cunningham, 63, a former Navy fighter pilot who shot down five MIGs during the Vietnam War and was a role model for Tom Cruise in the movie "Top Gun," is being investigated by the FBI and other federal agencies for selling his house in November 2003 to a military contractor for what may have been an inflated price.

Mitchell Wade, 42, president and chief executive of Washington-based MZM Inc., bought the house for $1,675,000, then sold it seven months later for $975,000, a $700,000 loss. The house deal was first disclosed earlier this month by the San Diego Union-Tribune.

For The Record
Los Angeles Times Saturday June 25, 2005 Home Edition Main News Part A Page 2 National Desk 2 inches; 61 words Type of Material: Correction
Congressman's home sale -- An article in Thursday's Section A about the sale of a home belonging to Rep. Randall "Duke" Cunningham (R-San Diego) to a military contractor said the political action committee of San Diego-based Peregrine Systems contributed to Cunningham's 2004 campaign. In fact, the contribution was made by a committee of San Diego-based Peregrine Semiconductor Corp., a different company.

Critics suggest that Wade paid Cunningham for the house as a way to illegally funnel money to a congressman who has supported his company.

The fact that for months Cunningham has lived on Wade's yacht, named the Duke Stir, berthed in the Potomac River, has raised further questions about improper financial links.

Numerous questions remain about the relationship between Wade and Cunningham, among them, how the sale price for the house was determined, how Wade lost $700,000 on the resale amid one of the hottest real estate markets in the state and whether Cunningham is paying an appropriate rent for the use of Wade's boat.

After San Diego's North County Times revealed the yacht deal last week, Cunningham's office issued a statement offering to prove that he pays rent, but no records have been produced.

Cunningham sits on the Defense Appropriations Subcommittee. Although congressional committees rarely vote on individual government contracts, members of key panels can influence who gets the awards. The appropriations subcommittee is one of the most influential.

Wade, a reserve officer in the Navy, was a program manager for communications and intelligence for the Navy and the Department of Defense for eight years before founding MZM in 1993. The firm specializes in sophisticated intelligence-gathering and analysis.

Records show that MZM has more than $66 million in at least 93 government contracts, enough to make the company No. 100 on Washington Technology magazine's list of the top federal contractors.

Cunningham has said that MZM is among those military contractors he has favored. A watchdog group, Citizens for Responsibility and Ethics in Washington, has filed a Freedom of Information Act request for information about contacts made by Cunningham in favor of MZM with officials at the Pentagon or the Department of Homeland Security.

One of the few unclassified contracts between MZM and the federal government is a $1.2-million program to provide linguists and interpreters for Iraq and elsewhere. In another contract, MZM has joined General Dynamics and other firms to upgrade "warfare services" for the Air Force.

Like most military contractors, MZM has a political action committee that contributes to the campaigns of politicians who influence the awarding of contracts and shape public policy. The MZM political action committee has contributed to several politicians, including giving $7,000 to Cunningham's 2004 campaign.

Wade has also contributed to Cunningham's political action committee, the American Prosperity Political Action Committee, which doles out money to candidates and causes of his choosing.

In addition, Cunningham's wife, a chief of staff for an Education Department official, and one of his daughters are on the advisory council to the Sure Foundation, a nonprofit group created by Wade and his wife to raise funds for projects to aid refugee children. Last year a congressional subcommittee on District of Columbia operations, with Cunningham as a member, allocated $100,000 to the foundation.

A month after selling their Del Mar Heights home, Cunningham and his wife, Nancy, paid $2.5 million for an 8,000-square-foot home in exclusive Rancho Santa Fe owned by Douglas and Karen Powanda.

Douglas Powanda is a former executive vice president at Peregrine Systems, a San Diego-based business-software company.

Peregrine was Cunningham's third-largest corporate contributor in 2004, giving $14,000 in individual and corporate donations. In late 2004, Powanda was among eight former Peregrine executives indicted by a federal grand jury in an alleged multibillion-dollar securities fraud; he awaits trial.

Cunningham, known as accessible and cordial even to reporters who have written critically of him, has hunkered down in the wake of the disclosures about the Del Mar Heights house sale.

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