Congressman has options to cover legal costs

By: MARK WALKER - Staff Writer | Monday, June 27, 2005 8:57 PM PDT ∞

If he wants, Rep. Randy "Duke" Cunningham can draw from the $635,000 in campaign funds he controls to pay legal bills arising from an investigation into his dealings with a Washington defense contractor.

Federal statute allows the embattled Republican lawmaker to spend that money on legal expenses, something a spokesman for the Federal Elections Commission said Monday happens from time to time.

Cunningham, who has not indicated how he will pay his legal bills, also has the option of setting up a legal defense fund. That option, in use by House Majority Leader Tom DeLay, who is battling ethics charges, would need approval from the House Committee on Standards of Official Conduct.

On Friday, the attorney hired by Cunningham refused to comment on whether a legal defense fund would be established. Cunningham represents the 50th Congressional District, which includes much of North County.

As of Monday, the Office of the Clerk of the House said no paperwork required to begin the process of establishing a legal defense fund had been filed.

Cunningham is reportedly the target of a probe by the San Diego U.S. attorney's office as a result of real estate and living arrangement deals with contractor Mitchell J. Wade, a friend of Cunnigham's whose company has seen its government contracts increase dramatically in recent years.

The relationship between Cunningham and Wade, who allegedly overpaid Cunningham for his Del Mar home and allowed the congressman to live on his yacht, has raised questions about whether Cunningham steered contracts to Wade.

While the U.S. attorney's office has refused to confirm reports that it is conducting an investigation, Cunningham issued a written statement Thursday defending his dealings with Wade and acknowledging "there is now a legal inquiry under way."

The size of the legal bill that could result from Cunningham's troubles is unclear. The congressman has hired attorney K. Lee Blalack of the Washington firm O'Melveny & Myers, who in an interview on Friday intimated that a team of unspecified size was working on behalf of Cunningham. He declined to disclose his firm's billing rate.

Under the law, members of Congress can tap into their campaign accounts and any funds in a political action committee they control to pay defense costs arising out of actions brought in connection with their official duties, said Bob Bieresack, a Federal Elections Commission spokesman in Washington.

There is no ceiling on how much can be spent from those accounts on legal fees.

"It has to be reported as a disbursement, but there are no limits," Bieresack said, adding that such spending from campaign accounts is "not common but it happens periodically."

Through March 31, the Friends of Duke Cunningham committee had $601,903 on hand with no debts owed, according to its latest report on file with the Federal Elections Commission.

A political action committee that Cunningham formed in 2000, American Prosperity, had $33,630 in its coffers as of May 31, according to its latest report.

It has become increasingly common for members of Congress to create their own political action committees to make contributions to other members' campaigns and to those running for the first time, according to Larry Noble, executive director of the nonpartisan, nonprofit Center for Responsive Politics in Washington, which tracks campaign spending.

Among the contributors to American Prosperity in 2004 was a political action committee controlled by Wade's company, MZM Inc., which gave it $2,500 in June and another $2,500 in September.

In its latest filing, Friends of Duke Cunningham reported raising $23,500 coming from individual contributors through March 31 and $62,500 from political action committees between Jan. 1 and May 31.

Only six of the 38 individual contributors had San Diego County addresses. The rest had Washington or surrounding area addresses and appeared associated with firms that do business with the federal government, according to the elections commission filing.

One of those contributors, Glen Freiberg of Rancho Santa Fe, said Monday that he would not object if the $250 contribution he made in March is spent on legal fees.

"My contribution to Duke was for him to use as he best sees fit," Freiberg said.

Among the 25 contributions from political action committees, the most came from the BAE Systems North America Inc., which gave $4,000 on April 22 and another $5,000 on April 28, according the elections commission filing.

BAE Systems is a worldwide high-tech information and security firm with its North American headquarters in McClean, Va.

The next reports of campaign contributions and expenditures for the second quarter of the year are due on July 15. If Cunningham chooses to use funds from his campaign account or his political action committee for legal fees but doesn't draw from either before July 1, that spending would not have to be reported until October.

Noble said he believed that Cunningham would be cautious about those funds for attorney fees.

"I would think he wouldn't want to use up campaign funds for this," Noble said. "If he seeks re-election, he would want to be careful about spending too much of the money he would need."

Contributions to a legal defense fund that Cunningham could establish are limited to $5,000 a year per individual, union or corporation.

Wade has refused repeated interview requests.

Contact staff writer Mark Walker at (760) 740-3529 or mlwalker@nctimes.com.

A federal investigation into the Cunningham-Wade relationship would most likely focus on Wade's 2003 purchase of Cunningham's Del Mar Heights home for $1.65 million, and its resale of 11 months later for $700,000 less than what he paid Cunningham.

The congressman now serving in his eighth term of office also has acknowledged living aboard Wade's boat named the "Duke-Stir" at a Potomac River marina. Cunningham said in his statement last week that he had paid more than $13,000 in dock and maintenance fees in lieu of traditional rent.

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