FBI Raids Home of Rep. Cunningham

Federal agents Friday raided the home of Rep. Randy “Duke” Cunningham as part of a grand jury probe of the congressman’s links to a defense contractor.

Agents also served search warrants on the Washington offices of the contractor, MZM Inc., and at the Duke Stir, the 42-foot yacht owned by MZM founder Mitchell Wade where Cunningham (R-San Diego) has been living for more than a year.

K. Lee Blalack, Cunningham’s lawyer, called the raid “an appalling abuse of government power.”

The federal investigation centers on the sale of Cunningham’s house in November 2003 to Wade for $1,675,000. Investigators appear to be looking at whether the price was inflated to allow Wade to funnel money to the congressman. Cunningham’s position in Congress, where he sits on a committee that controls the Pentagon budget, could have allowed him to influence the flow of contracts to MZM.

The home was never offered publicly for sale. Months after buying it, Wade sold the home for $975,000, a $700,000 loss. Cunningham and his wife bought their current house, an 8,000-square-foot home in Rancho Santa Fe, for $2.5 million soon after selling the Del Mar Heights house to Wade.

Cunningham says he offered to sell the house to Wade after the contractor said he needed a place near Miramar Marine Corps Air Station, where MZM has a project.

In a three-page statement issued last week, Cunningham said he showed poor judgment in selling the home to Wade but that he never gave preferential treatment to the defense contractor. He said he had paid $13,000 in berthing fees and maintenance costs related to his stay on Wade’s yacht, which is berthed at a yacht club on the Potomac River.

Cunningham also has said the price of the Del Mar Heights house was determined by comparing sales of similar-sized homes in the neighborhood. He said the work was done by real estate agent Elizabeth Todd, a longtime friend and contributor.

Todd has also received a subpoena from investigators.

Cunningham and his wife, Nancy, were not in when agents arrived at the house in Rancho Santa Fe, an exclusive community 25 miles north of San Diego.

Blalack said that Cunningham had earlier offered to cooperate fully with FBI authorities probing the sale of his house in Del Mar Heights to Wade in 2003.

“They will apparently not take ‘yes’ for an answer and have instead opted to use strong-arm tactics that were designed to generate headlines,” Blalack said.

An attorney from Blalack’s law firm arrived at the Rancho Santa Fe house during the search, which was authorized by a secret affidavit issued by a federal grand jury in San Diego. FBI officials declined to say what agents were searching for.

Cunningham, 63, an eight-term member of Congress, is scheduled to return to his northern San Diego County district this weekend for Fourth of July celebrations, his first home visit since the controversy began.

According to the Defense Information Systems Agency, MZM has received $163 million in federal contracts, mostly for classified projects involving the gathering and analysis of intelligence.

Last month the agency halted the awarding of new contracts to MZM as part of a change in federal regulations requiring more competitive bidding. The change is not related to the investigation, and MZM will be allowed to bid for new projects, said Mike Thiem, spokesman for the Defense Information Systems Agency.

According to the Washington Post, an MZM official who worked closely with Wade shredded a large stack of documents on the third floor of MZM’s Washington headquarters two weeks ago. The Post said it based its account on two sources with knowledge of the incident who spoke to its reporters Friday. They said the official destroyed the documents June 17 in a waist-high machine during Wade’s final hours in the office.

The federal probe into the relationship between Wade and Cunningham involves the FBI, the U.S. attorney’s office, the Defense Criminal Investigative Service and the Internal Revenue Service, according to Jan Caldwell, spokeswoman for the FBI office in San Diego.