Cunningham resigns, admitting bribery, tax evasion

By: MARK WALKER and WILLIAM FINN BENNETT - Staff Writers | Tuesday, November 29, 2005 10:23 AM PST ∞

SAN DIEGO ---- Admitting to startling acts of corruption that netted him more than $2.4 million in bribes, Rep. Randy "Duke" Cunningham pleaded guilty Monday to one count of conspiracy to commit bribery and one count of tax evasion and resigned from his 50th Congressional District seat.

The former Vietnam-era Navy ace admitted to having solicited and received cash bribes and illicit gifts from four unnamed co-conspirators in exchange for helping two defense contractors obtain government defense contracts valued in the millions of dollars over the last five years.

He faces up to 10 years in federal prison, a $350,000 fine and the forfeiture of more than $1.8 million in illegally gained assets when he goes before U.S. District Court Judge Larry Alan Burns again on Feb. 27.

In a wrenching statement made after his court appearance, Cunningham apologized for having let down his family and his constituents.

"In my life I have known great joy and great sorrow," the Escondido Republican said when he appeared before reporters about 90 minutes after he entered his guilty pleas. "And now I know great shame."

Cunningham's resignation will result in a special election to fill out the remaining term, which expires in January 2007.

In a nearly hourlong appearance before Burns, the 63-year-old Cunningham admitted to demanding numerous bribes from defense contractors and others between 2001 and 2004 and to filing false tax returns involving more than $1 million in unreported income.

As part of his plea agreement, Cunningham must answer any questions that federal and state authorities have regarding his actions and those of his co-conspirators.

Dressed in a charcoal gray suit and flanked by two of his Washington attorneys, a gaunt and haggard Cunningham stood before the judge with his shoulders slumped and his head bowed.

As Burns read off the litany of charges, he stopped after each and asked Cunningham if he committed the crimes. In a soft voice, Cunningham responded to each, "Yes, your honor."

Cunningham acknowledged that in exchange for helping two defense contractors secure contracts, he received a myriad of cash payments and favors. The graft included loan payoffs on his Rancho Santa Fe mansion, inflated prices in another real estate transaction, a yacht purchase and a rent-free stay aboard yet another Washington yacht named the "Duke-Stir," as well as antique furniture and a Rolls Royce.

"This is one of the most egregious cases of corruption I have seen," said Rick Gwin, special agent in charge of the Defense Criminal Investigative Service, an arm of the Pentagon.

Cunningham attorney Mark Holscher told the court that despite his admissions of accepting bribes in exchange for steering contracts to his friends, the congressman believed "many of those contracts were for the good of the country."

Prosecutors said those contracts amounted to "tens of millions of dollars."

Immediately after the court hearing, Cunningham was led away by U.S. marshals to be booked, fingerprinted and photographed. He was released on his promise to reappear for sentencing.

'Compromised'

After he was booked and when he appeared before reporters, Cunningham ---- flanked by attorneys K. Lee Blalack and Holscher ---- broke down. His voice cracked with emotion as he announced he was resigning from Congress "because I've compromised the trust of my constituents."

The deal reached with prosecutors requires Cunningham to give up the Rancho Santa Fe mansion that was a catalyst to his ultimate fall from a pinnacle of power. The congressman also must turn over $1.8 million in cash and more than three dozen pieces of furniture, antiques and Persian-style rugs.

"The truth is, I broke the law, concealed my conduct and disgraced my high office," Cunningham said in his statement. "I know that I will forfeit my freedom, my reputation, my worldly possessions, and most importantly, the trust of my friends and family."

Harmony Allen, Cunningham's chief of staff in his congressional office, issued a statement later in the day saying the Clerk of the House of Representatives will assume control of the office.

A special election to fill Cunningham's seat for the remainder of 2006 is now in the works, and could take place as soon as late January. If no candidate wins more than 50 percent of the vote, a run-off election will be held to determine who serves the rest of Cunningham's existing term. There will also be a June primary in advance of the November general election to determine who will represent the predominantly North County district during the two-year term that begins in January 2007.

Carol Lam, the U.S. attorney for the Southern District of California, said Cunningham admitted that he took more than $2.4 million in bribes from co-conspirators. He did so by accepting checks and cash totaling more than $1 million, rugs, antiques, furniture, yacht club fees, boat repairs, moving costs and vacation expenses.

"The citizens who elected Mr. Cunningham assumed that he would do his best for them," Lam said. "Instead, he did the worst thing an elected official can do ---- he enriched himself through position and violated the trust of those who put him there."

'It's really unbelievable'

In a reaction from the White House, spokesman Ken Lisaius said, "We appreciate Congressman Cunningham's service to his country in Vietnam.

"His current situation is unfortunate. We respect his decision to resign and admit wrongdoing."

Local reaction to Cunningham's guilty pleas ranged from sadness to shock at the amount of illicit money, services and goods he admitted taking.

"I certainly think it goes a long way toward explaining the lack of enthusiasm people have toward voting," said Carlsbad's Dawn Tucker. "It makes people feel like they have no say, and when they vote it doesn't matter."

Vista's Barbara O'Dell said she believes Cunningham should be punished.

"We pay our taxes, they (politicians) should pay them, too," she said.

In the nation's capital, watchdog groups said the acts Cunningham admitted to doing were unprecedented.

The facts "are much worse than I imagined," said Melanie Sloan, a former Democratic congressional staffer now working as executive director of Citizens for Responsibility and Ethics in Washington, a group that monitors ethics violations in Washington. "It's really unbelievable."

A spokesman for another Washington watchdog group, Taxpayers for Common Sense, said he could not recall any example of such egregious conduct as Cunningham's.

"This becomes a poster child of corruption No. 1 in Congress," spokesman Keith Ashdown said.

The unraveling of Cunningham's illicit dealings with defense contractors began in June when Copley News Service reported that Mitchell Wade, founder of the Washington defense firm MZM Inc., had paid $700,000 more for Cunningham's Del Mar Heights home than he would sell the same property for less than a year later.

That report was followed by a North County Times article that reported Cunningham had lived rent-free aboard a boat owned by Wade named the "Duke-Stir" at a Washington marina.

The co-conspirators

Lam said that as a result of Cunningham's acts, the two unnamed defense contractors in the plea agreement obtained "tens of millions in contracts."

Earlier stories about the Cunningham investigation showed dealings with the following individuals.

n Wade, the founder of Washington defense contractor MZM Inc. Federal documents show the company received more than $163 million in federal contracts in recent years. Wade left the company last summer and it has since been sold to another firm.

Wade's attorney declined comment when reached Monday afternoon.

n Brent Wilkes, the owner of Poway-based ADCS Inc. The firm, which specializes in computerized information management, received $76 million in Defense Department contracts between 2000 and 2004.

One of Wilkes' attorneys, Michael Lipman, refused to discuss any specifics of the case Monday.

n New York businessman Thomas Kontogiannis, who has said he bought a 65-foot boat, the "Kelly C," from Cunningham in 2002 for $627,000. A firm owned by Kontogiannis' daughter later made two real estate loans totaling about $1.1 million to Cunningham, and Kontogiannis has said he used the money he owed Cunningham for the boat purchase to pay off one of the two real estate loans from his daughter's firm.

Efforts to reach Kontogiannis in New York on Monday evening were unsuccessful.

In recent months, federal investigators with several different agencies conducted raids on the offices and homes of Cunningham, Wade, Wilkes and Kontogiannis, as well as Wade's yacht, the Duke-Stir.

Lam said Cunningham's fate should serve as a warning to other officials that crime doesn't pay.

"I think it's very important for everyone to know that the federal government takes bribery of public officials very seriously," she said.

One of the prosecutors, Phillip Halpern, said that while he is proud of the work done by his office and the other federal agencies, he is not gloating.

"It's a sad day when this type of conduct from our public officials is revealed," Halpern said.

'I was not strong enough ...'

Cunningham and his wife, Nancy Cunningham, an Encinitas Union School District official, are no longer living in the Rancho Santa Fe home. It remains for sale, and Nancy Cunningham's attorney Michael Attansio said she will continue to petition for her monetary interest in the property even though her husband has forfeited his right to do so.

A source close to the investigation said there is no expectation that Nancy Cunningham will face charges.

In his statement, Cunningham said he lied about his actions when he denied any wrongdoing in June because he was weak.

"I am resigning from the House of Representatives because I've compromised the trust of my constituents. When I announced several months ago that I would not seek re-election, I publicly declared my innocence because I was not strong enough to face the truth."

He also lamented betraying the trust of the voters and those closest to him.

"I misled my family, staff, friends, colleagues, the public ---- even myself. For all of this, I am deeply sorry," he said.

Contact staff writer Mark Walker at (760) 740-3529 or mlwalker@nctimes.com and staff writer William Finn Bennett at (760) 740-5429 or wbennett@nctimes.com.

Government: Cunningham took dozens of bribes

According to documents filed by the U.S. attorney's office in court Monday before his resignation from Congress, Randy "Duke" Cunningham has admitted participating in or benefiting from the following activities with four unnamed co-conspirators:

- In May 2000, a co-conspirator paid him $100,000, which he never declared on his federal income tax returns.

- In November 2001, a co-conspirator paid an antique store $12,000 for three night-stands, a leaded glass cabinet, a wash stand, a buffet and four armoires that were delivered to Cunningham.

- In December 2001, a co-conspirator paid $200,000 to a company controlled by another co-conspirator that wired the money into an escrow account set up to purchase a condominium for Cunningham in Arlington, Va.

- In December 2001, a co-conspirator paid $50,000 to a company controlled by another co-conspirator to help pay for the Arlington condominium. Another $50,000 was paid into Cunningham's personal bank account later that month.

- In January 2002, a co-conspirator paid nearly $7,000 to a furniture store for a leather sofa and sleigh-style bed for Cunningham.

- In February 2002, a co-conspirator paid $7,200 for two antique commodes. That same month, another co-conspirator gave Cunningham $10,000.

- In April 2002, a co-conspirator paid $13,500 toward the purchase of a Rolls Royce for Cunningham. The following month, that same person paid nearly $18,000 for repairs to the car.

- In August 2002, a co-conspirator paid $140,000 to a third party for the boat the Duke-Stir, which was then moved to Cunningham's Washington boat slip for his personal use.

- In September 2002, Cunningham failed to declare on his income tax return more than $250,000 in illicit payments and benefits he received in 2001.

- In September 2002, a co-conspirator gave Cunningham $20,000. A day later, another co-conspirator paid nearly $17,000 for repairs to Cunningham's yacht, the Kelly C.

- In October 2002 a co-conspirator paid $2,000 to transport the Kelly C.

- In November 2002, a co-conspirator paid $7,500 in yacht club fees for Cunningham. Later that same month, another co-conspirator gave Cunningham $40,000. Still later that month, a co-conspirator paid more than $1,100 for more repairs to the Rolls Royce.

- From December 2002 until May 2005, a co-conspirator paid more than $58,000 toward a mortgage on the Kelly C.

- In January 2003, a co-conspirator gave Cunningham $33,000.

- In April 2003, Cunningham failed to declare more than $250,000 in illicit payments and benefits on his federal income tax returns.

- In May 2003, he filed registration papers with the California Department of Motor Vehicles for a 1999 Suburban showing a sales price of $18,000. He in fact got the vehicle from a co-conspirator for the below-market price of $10,000. One week later, a co-conspirator gave him $8,000.

- In June 2003, a co-conspirator paid slightly more than $2,700 to a resort for Cunningham's lodging and meals, a set of earrings, a charm and a necklace.

- In July 2003, a co-conspirator paid $9,200 for two shooting simulators and gave them to Cunningham.

- In September 2003, a co-conspirator gave him slightly more than $19,000.

- In November 2003, Cunningham signed the agreement to sell his Del Mar Heights home for $1.5 million to a co-conspirator, identified by sources close to the investigation as defense contractor Mitchell Wade, for what prosecutors said was an artificially inflated price. The following day, Cunningham persuaded Wade to pay him an additional $175,000 above the $1.5 million. The next day, Cunningham signed a second sales agreement reflecting the $1.675 million sale price and concealed Wade's participation in the deal by removing his name from the documents and listing Wade's Nevada real estate company.

- In December 2003, a co-conspirator transferred loan proceeds of a little more than $1 million into an escrow account set up for Cunningham's purchase of a Rancho Santa Fe estate.

- In December 2003, a co-conspirator paid $115,100 to Cunningham through Cunningham's company, Top Gun Enterprises Inc.

- In February 2004, a co-conspirator paid more than $11,000 to move the furniture from Cunningham's Arlington condominium to his Rancho Santa Fe home.

- In March 2004, a co-conspirator paid more than $8,100 for a charter jet, hotel and meals for Cunningham.

- In April 2004, Cunningham failed to declare on his federal income tax return more than $500,000 in illicit payments and benefits.

- In May 2004, a co-conspirator paid $525,000 to a company controlled by another co-conspirator to pay off a second mortgage on Cunningham's Rancho Santa Fe home.

- In May 2004, a co-conspirator paid more than $2,000 to a Washington hotel for a graduation party for Cunningham's daughter.

- In June 2004, a co-conspirator gave Cunningham $6,500 in cash. Later that month, the same person paid $18,000 to Cunningham's Top Gun Enterprises Inc.

- In August 2004, a co-conspirator made two payments totaling $500,000 to Top Gun Enterprises, Inc. which Cunningham used for a payment on one of two mortgages on the Rancho Santa Fe home.

- In November 2004 to June 2005, a co-conspirator paid more than $28,000 in mortgage payments on the Rancho Santa Fe home.

- In April 2005, Cunningham failed to declare more than $1 million in illicit payments and benefits on his 2004 federal income tax return.

- In May 2005, a co-conspirator paid $15,200 for five Persian-style rugs for Cunningham's home.

- In November 2001 and May 2005, a co-conspirator paid more than $50,000 to various antique stores for several items, including silver candelabras, glass vases, antique armoires, Persian-style rugs and custom oak and leaded glass doors.

- January 2000 and the spring of 2005, Wade and Brent Wilkes of the Poway defense firm ADCS paid more than $10,000 to various resorts, hotels and restaurants for Cunningham.

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