Bitterness expressed at owner at center of Cunningham controversy

By: MARK WALKER - Staff Writer | Wednesday, June 29, 2005 12:28 AM PDT ∞

A resignation letter and an internal e-mail sent to employees of Washington defense contractor MZM Inc., the company linked to U.S. Rep. Randy "Duke" Cunningham, paint a portrait of a company in upheaval.

In an e-mail to employees obtained by the North County Times, new president James C. King wrote that he took the job Monday only after owner Mitchell Wade agreed to relinquish all authority and sell the firm.

King replaced Frank Bragg, who had replaced Wade earlier this month and served in the top post for less than two weeks before quitting on Friday.

Wade's relationship with Cunningham, R-Escondido, has come under increasing scrutiny and may be the subject of a grand jury investigation by the U.S. attorney's office in San Diego. That investigation was confirmed for the first time in a terse statement issued Tuesday by Cunningham's attorney, K. Lee Blalack.

The probe most likely surrounds a 2003 real estate transaction between Wade and Cunningham and questions about whether Cunningham influenced the award of Defense Department contracts to MZM through his position on powerful congressional committees.

In the real estate deal, Cunningham sold his Del Mar Heights home to Wade, who turned around and sold it 11 months later for $700,000 less than he paid the congressman. Shortly after the sale, MZM saw a sharp increase in its contracts with the Defense Department, reporting on the company Web site that its revenues from those contracts tripled in fiscal year 2004.

In the resignation letter, which was obtained by the North County Times and confirmed as authentic by two people close to MZM, Bragg wrote of his bitter anger at Wade.

"Words alone hardly suffice to express the anger and disappointment I feel following the events of the past two weeks," wrote Bragg, who served as president for about 10 days. "MZM's credibility has been irreparably harmed, the trust of our employees and clients has been shaken to its core, and each day brings new revelations that compound the problems."

Wade ---- who is being represented by the Washington firm Wilmer, Cutler, Pickering, Hale & Door ---- could not be reached. The law firm declined comment.

The letter addressed to Wade was dated June 24 and came less than two weeks after Wade resigned and Bragg agreed to take the job. Bragg had previously been a special assistant to Wade, who remains the privately held company's principal owner.

The bitterness expressed in Bragg's letter was preceded by praise for the company's workers and an expression of concern about the company's ability to carry out its government work.

"MZM was a family made up of dedicated, hard working, talented and patriotic men and women who came to work here because they believed in the values the company espoused and the mission we were engaged in," the resignation letter to Wade read.

"Your actions made a mockery of those values and even endangered our important work. Your reckless disregard for the families that serve as the backbone of this organization is unconscionable," the letter stated. "They are good people with noble aspirations and simple dreams and I firmly believe you took unfair advantage of them. Without the help of an unforeseeable miracle, the legacy of MZM will be one of heartbreak that will take years to heal."

In an e-mail to MZM employees obtained by the North County Times, the new company president, James C. King, wrote Monday that he accepted the post only after obtaining two specific concessions from Wade.

"I agreed to take on this job only when the current owner agreed in writing that: (1) the strategic goal of the company was a sale; and (2) I would have sole executive authority at the company."

King's e-mail was sent to all company employees Monday evening and outlined his plans to keep the company afloat until a sale can be arranged.

"In my judgment, the best way to ensure the financial security of our families as well as the integrity of our missions is to arrange for the transfer of MZM and its contract responsibilities to a third party," the message read.

King, a retired U.S. Army lieutenant general, also tried to impart a sense of optimism in his message.

"What I ask of each of you is that while I carry forward the mission of a corporate transformation, you must carry forward the important work we do for our government," the e-mail message to employees read. "We have a culture of excellence and dedication that has consistently earned the highest marks from our government clients and customers. It is the continued enthusiasm of our customers that will make us an attractive business partner and ultimately ensure continuity both for our families and our missions."

Before joining MZM, King headed the National Imagery and Mapping Agency.

Much of MZM's work is classified, something underscored in Cunningham's statement when he wrote that the company "provides highly classified human intelligence support to the U.S. military" and that he was not at liberty to discuss the specifics of its work.

In addition to Bragg, several other MZM employees have resigned in recent days, according to news reports from Washington. Those resignations include the company's senior vice president for national security transformation, Kay Cole James.

James had been appointed by President Bush in 2001 to head up the U.S. Office of Personnel Management and joined MZM in May.

In its late Tuesday announcement confirming the change in leadership, MZM said its priorities are to "continue the critical mission carried out by MZM."

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

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