Cunningham signed Coast Guard documents in May saying he owns boat; NY businessman contends it's his

By: WILLIAM FINN BENNETT - Staff Writer | Friday, July 8, 2005 12:16 AM PDT ∞

Newly obtained records from the U.S. Coast Guard show that U.S. Rep. Randy "Duke" Cunningham signed two statements in May saying he owned a boat known as the "Kelly C," even though a New York businessman says he owns the flat-bottom boat and paid $627,000 to buy it in 2002.

Cunningham reportedly lived on the boat in Washington, D.C., before moving to a yacht owned by a defense contractor. Cunningham is under investigation by a federal grand jury over his financial ties to the owner of that defense company, and questions have been raised about whether he steered millions of dollars in business to the firm in exchange for favors.

Cunningham reportedly sold the Kelly C for $627,000, a price that one yacht expert said Thursday is way too high.

When Cunningham signed a federal application in May for the U.S. Coast Guard to reissue documentation on the 65-foot Kelly C, he stated that he owned the boat. In a follow-up letter later that month, he stated: "I am the sole owner of the 'Kelly C.' "

A Washington attorney representing Cunningham implied Thursday that the congressman signed the Coast Guard documents in the belief that he would be closing the deal to buy back the Kelly C.

"These documents are entirely consistent with your previous reports regarding Duke's attempt to register the Kelly C in his name in anticipation of its resale from Mr. Kontogiannis," attorney K. Lee Blalack said, referring to the boat's owner, New York businessman Thomas Kontogiannis.

Kontogiannis could not be reached for comment Thursday. However, in an interview earlier this week, he said that all of his business dealings with Cunningham have been legitimate and there was no "hanky-panky."

The North County Times obtained copies of the Coast Guard documents Thursday, and Cunningham's signature is clearly legible on both.

Despite the congressman's signed statements to the Coast Guard that he owns the Kelly C, Kontogiannis said this week that he bought the boat from Cunningham in 2002. He still owns it and has the bill of sale to prove it, Kontogiannis said. He added that he eliminated most of that debt by paying off a mortgage on Cunningham's Rancho Santa Fe house.

Coast Guard officials have confirmed that Axxion LLC ---- a company controlled by Kontogiannis' family ---- did file a Coast Guard application for registration in 2003. However, because the company did not provide proof of ownership, Coast Guard officials sent a letter to the company asking it to provide such proof. The letter was never answered, a Coast Guard official said, and that was the reason why the certificate of documentation was reissued to Cunningham in May.

If the Coast Guard had evidence that someone other than the true owner of a boat had been issued a certificate of registration, the document would probably be revoked, a Coast Guard official said earlier this week.

Too high a price?

A salesman with San Diego-based Cabrillo Yacht Sales says that used flat-bottom boats such as the Kelly C, which Cunningham purchased in 1997 from another congressman for $200,000, typically lose their value over time, leading him to question the $627,000 sale price.

"It might be worth a couple hundred thousand, maybe ----- but probably not," yacht salesman Dan Peter said Thursday. However, he added that if the boat has expensive amenities, it could be worth more.

"I would say that what he sold it for is a gross overestimate of value," he said.

Kontogiannis said that the bill of sale he received from Cunningham is for $1 plus other valuables. When asked why they agreed to put the sale price so low, when in fact the amount he said he paid Cunningham was $627,000, Kontogiannis said that using a symbolic price of $1 is common in such transactions.

Kontogiannis has acknowledged that he recently discussed selling the boat back to Cunningham, but that he decided against it because it would cost him too much to replace. In other news reports, Kontogiannis has declined to reveal the possible sale price.

In an interview earlier this week, Kontogiannis said that he had an appraisal done of what it would cost him to replace the Kelly C if he sold it to Cunningham. That appraisal pegged the replacement value at $1.2 million, Kontogiannis said.

Yacht salesman Peter said it is misleading to use the replacement value of the boat for determining the resale value of the Kelly C, because its resale value would be significantly lower than the replacement cost.

"($1.2 million) is what it would cost to build today; there is a lot of twisted numbers going on around there," he said.

In an earlier interview, Cunningham attorney Blalack said all of Cunningham's business dealings with Kontogiannis have been aboveboard.

A federal grand jury is looking into Cunningham's ties to Mitchell Wade, the president of Washington defense contractor MZM Inc., including Cunningham's sale of his Del Mar Heights home to a company owned by Wade, which in turn sold the house 10 months later at a $700,000 loss.

Subsequently, Cunningham helped finance the purchase of the 7,800-square-foot Rancho Santa Fe home where he now lives with two loans from a New York company owned by Kontogiannis' daughter and nephew. Kontogiannis said the interest rate on the first loan was at prevailing market rates at the time. The second loan was at a higher rate of 10 percent, which was also reflective of second-mortgage market rates at the time, he said.

Contact staff writer William Finn Bennett at (760) 740-5426 or wbennett@nctimes.com.

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