Cozying Up to Power

Brent R. Wilkes was a small defense contractor who looked for powerful friends in high places.

When Arnold Schwarzenegger ran for governor, Wilkes was one of the first to contribute to his campaign. Schwarzenegger later gave him plum appointments to boards that oversee the prestigious Del Mar racetrack, where Wilkes held court on opening day in 2004 and 2005.

On Capitol Hill, Wilkes plied lawmakers with gifts, favors and hefty campaign contributions. He leased a jet and took then-House Majority Leader Tom DeLay (R-Texas) to three states on a golfing vacation. He hired expensive lobbyists close to legislators who controlled last-minute changes to the Pentagon’s budget.

Over the last decade, some of Wilkes’ two dozen firms in San Diego and Virginia received about $100 million in federal contracts. They were small deals by Washington standards, usually a few million dollars apiece, and they involved dull jobs -- scanning and filing documents, supplying computer storage devices or delivering bottled water to government workers overseas -- but rivals complained that Wilkes got more than his share.

Not bad for someone who grew up poor, raised by a single mother in a small, prefab home south of a San Diego Navy base.

Now investigators want to find out whether Wilkes committed any crimes in securing those government jobs.

Federal prosecutors in California, Texas and Washington are investigating political contributions by Wilkes, his associates and employees of his numerous companies, sources familiar with the investigations said. Separately, the Pentagon’s inspector general is probing contracts awarded to a Wilkes company, a Pentagon source said.

Wilkes was a shrewd businessman, those who worked with him recall. Court documents, Pentagon reports and campaign finance records show that he carefully built a broad network of political contacts to enhance his chances of winning new business.

The public story about Wilkes now includes reports of his involvement with DeLay, disgraced former Rep. Randy “Duke” Cunningham, prostitutes and the No. 3 official at the CIA, who may have steered business to Wilkes. The CIA’s executive director, Kyle “Dusty” Foggo, has been a friend of Wilkes’ since their youth. They roomed together at San Diego State University, were best men at each other’s weddings and named their sons after each other.

Prosecutors are also reportedly investigating whether Wilkes and an associate paid for hotel hospitality suites in Washington and supplied prostitutes for congressmen. Wilkes’ San Diego attorney, Michael Lipman, said his client “vehemently denies any involvement with prostitution.”

Wilkes, 51, has not been charged with a crime. Federal prosecutors declined to comment.

But Wilkes’ lawyer has confirmed that his client is “co-conspirator No. 1,” who plays a prominent role in the Cunningham case.

In March, Cunningham was sentenced to eight years and four months in prison, the harshest penalty ever imposed on a former member of Congress in a corruption case. The San Diego Republican admitted receiving $2.4 million in bribes, gifts and favors from four co-conspirators and evading more than $1 million in taxes. They were the price of Cunningham’s influence in landing lucrative defense contracts.

Cunningham admitted accepting a $100,000 bribe from co-conspirator No. 1 -- Wilkes -- and said that person helped pay off a $525,000 mortgage on his home. Prosecutors charged that Cunningham ignored a warning from a Pentagon official that $750,000 in invoices from a Wilkes firm appeared to be fraudulent.

Starting in 1996, Wilkes, his firms, employees and family members donated more than $600,000 to federal lawmakers and their political action committees, campaign finance records show. As Wilkes’ businesses expanded, so did his political contributions.

Ultimately, most of Wilkes’ government work came from “earmarks,” a controversial step in which legislators attach extra funds to bills to cover pet projects, even if a federal agency didn’t request them.

“Wilkes was brilliant. He knew how to work the system and he made the U.S. government his bottomless piggybank,” said Keith Ashdown, vice president of policy for government watchdog Taxpayers for Common Sense in Washington.

Wilkes and his associates made their largest federal campaign donations to House Appropriations Committee member Rep. John T. Doolittle, a Republican from Sacramento, who received $82,000. Cunningham received $76,500, and $60,000 went to Appropriations Committee Chairman Rep. Jerry Lewis (R-Redlands).

Lewis said Friday that he knew Wilkes socially years ago and even took a trip with him to Guatemala. But the lawmaker insisted he never had discussions with Wilkes about federal contracts. In January, he added, he donated Wilkes’ contributions to Habitat for Humanity.

Doolittle acknowledged openly advocating for Wilkes’ business interests in Washington because he believed that the technology developed by Wilkes’ company had useful military applications.

Wilkes’ role as a Capitol Hill player drew a sharp contrast with his humble childhood. He was one of six children of a Navy pilot posted at the Miramar air station near San Diego. His father was killed in 1959 while taking off from an aircraft carrier. Later, said Assemblyman Mark Wyland, an Escondido Republican, Wilkes often mentioned his father’s death to businessmen and politicians, including Cunningham, a decorated Navy pilot during the Vietnam War.

At Hilltop High School, Wilkes played on the football team and developed a lifelong friendship with Foggo. In college, Wilkes and Foggo were active in the Young Republicans, and they formed a friendship with City Councilman Bill Lowery, who was later elected to a San Diego House seat and was succeeded by Duke Cunningham.

Wilkes earned a degree in accounting and went to work as a CPA.

By the early ‘90s, Lowery had introduced Wilkes to Cunningham, said a former business associate who is part of the Cunningham probe and requested anonymity. Wilkes touted his Washington connections. It’s one reason he was hired as a lobbyist in 1993 for Audre Inc., a fledgling San Diego firm with a new technology to convert maps into a digital format.

About a year later, Wilkes formed a competing firm, ADCS Inc.

By 1997 Cunningham held a seat on the powerful House defense appropriations subcommittee, and that year he earmarked $20 million for the digital conversion initiative. The idea was to convert the Pentagon’s old engineering drawings, maps and paper documents into digital form for preservation. Wilkes’ ADCS was among the firms selected to receive project funds.

Over the next four years, Cunningham secured through legislation $80 million in digital document work, and Wilkes’ firm was always a beneficiary. But Wilkes wanted more.

The Pentagon was slow to pay Wilkes because Army officials in the field preferred Audre’s rival system, according to an inspector general’s report. So in July 1999, co-conspirator No. 1 faxed Cunningham “talking points” on how to bully a Pentagon manager into releasing more government funds. These documents were included in Cunningham’s sentencing hearing.

The memo instructed the lawmaker to demand that the Defense Department official shift money from another program to cover funds designated for ADCS. “We need $10 m[illion] more immediately,” Cunningham was to tell the official.

If the official didn’t cooperate, Cunningham was to say his next calls would be to two high-ranking Pentagon officials. The script called for Cunningham to add: “This is very important and if you cannot resolve this others will be calling also” -- two names in this passage are blacked out in the memo. Despite Cunningham’s threats, the Pentagon manager was unmoved, according to grand jury testimony.

A week later, Cunningham and Lewis called a Washington news conference to announce that they had slashed $2 billion in funding for the F-22 Raptor fighter jet, one of the Pentagon’s prized programs, citing cost overruns. Both congressmen had been key supporters of the project, and their comments shocked Pentagon officials.

Within days, the same Pentagon manager who had been resistant to Cunningham’s appeals sent the congressman a list of other programs where money could be “reallocated” to Wilkes’ firm, according to court documents. “The Defense Department spends $1 billion a day, so the [Wilkes] contract was like a rounding error. It just wasn’t worth putting our big programs at risk,” a senior Pentagon official said on condition he not be identified.

On Friday, Lewis said “there was no connection whatsoever” between his position on the F-22 program and Cunningham’s effort to pressure the Pentagon on Wilkes’ behalf. “If I knew about it, I would have stopped it,” Lewis said.

The Pentagon agreed to send $5 million more to Wilkes’ firm, according to court documents. The F-22 funds were later restored. In subsequent years, Cunningham and Lewis supported full funding for the warplane.

In May 2000, a month after his firm received the $5 million, Wilkes wrote two checks to Cunningham for a total of $100,000. These payments were used as evidence in the bribery case.

Defense contractors complained about Wilkes getting an outsize share of funding for the digital documents project, prompting a review by the Pentagon’s inspector general. A June 2000 report questioned this lopsided funding and said it caused some military officers to “lose confidence in the fairness of the selection process.”

About this time a Pentagon official concluded that Wilkes’ ADCS had fraudulently billed the Pentagon $750,000 for document scanning work at the Panama Canal that was never completed, court records show. A Pentagon official alerted Cunningham. Instead of taking action, the congressman later called the official’s boss to complain about his work, according to court documents.

Flush with government business, Wilkes bought a $1.4-million home in 1999 on a gated, two-acre estate in the San Diego suburb of Poway, with a tennis court and pool. The seller was Charger quarterback Stan Humphries.

Wilkes became a major philanthropist in his hometown. He and his wife, Regina, pledged $1 million to a San Diego children’s hospital. He donated generously to his alma mater, San Diego State, and established a foundation to help military families. A local YMCA named Wilkes man of the year.

Wilkes also built a stunning, $11-million glass office building in Poway to house his companies. He would hold fundraising dinners there for charities and GOP campaigns.

He often targeted political figures on the rise. Wilkes cultivated a relationship with Tom DeLay.

After DeLay became House majority leader in 2002, Wilkes and his associates contributed $57,000 to DeLay and his political action committee. Wilkes and his political advisory firm, Group W, also paid $630,000 to Alexander Strategy Group, a now-defunct Washington firm run by a former DeLay aide, to lobby for his business interests. Wilkes also paid for a golfing trip with DeLay.

DeLay’s tenure in the powerful post ended in September, when he was indicted on money laundering charges. DeLay plans to resign from Congress entirely. Wilkes was subpoenaed by Texas prosecutors as part of their investigation into the lawmaker’s activities.

In all, Wilkes spent at least $1.1 million on lobbyists, federal records show. Included in that tally was $160,000 to Lowery, a congressman turned Washington lobbyist. An important Lowery staffer is a former top aide to Lewis. In Washington, Wilkes also shared a wine locker with his CIA friend Foggo at the Capital Grille restaurant, where powerful lobbyists court lawmakers.

Another Washington insider who was part of Wilkes’ circle was Mark Adams, deputy undersecretary of Defense in the Clinton administration. Adams oversaw contracts awarded to ADCS in the late 1990s. Within a month of leaving his government post, Adams joined Wilkes’ payroll. Adams could not be reached for comment.

The Pentagon inspector general is now reviewing contracts that were awarded to Wilkes, a Pentagon source said.

The connections between Wilkes and Cunningham that are being investigated are “the tip of the iceberg,” said Naomi Seligman Steiner, investigator for watchdog group Citizens for Responsibility and Ethics in Washington. She believes that other congressmen could be implicated in a wider corruption case.

In March, the CIA said that its inspector general had launched an investigation of Foggo and his ties to Wilkes. Newsweek magazine later reported that a 2004 contract valued at $2 million to $3 million went to a Virginia firm owned by Wilkes to supply bottled water and household goods to CIA staff members in war zones. At the time, Foggo worked in Germany as the senior CIA procurement officer and was in a position to award contracts for supplies going to operatives in Iraq and elsewhere.

The CIA issued a statement: “Mr. Foggo has overseen many contracts in his decades of public service. He reaffirms that they were properly awarded and administered.” The agency also said, “It is standard practice ... to look into assertions that mention agency officers.... That should in no way be seen as lending credibility to any allegation.”

Last week, the Wall Street Journal reported that prosecutors were investigating whether Wilkes and an associate had paid for hotel hospitality suites in Washington and supplied prostitutes for House members. The CIA confirmed only that Foggo attended poker games at Washington hotels.

Wilkes was active in state politics too. He and his associates have donated $230,000 to California candidates and Republican organizations since 2000. Schwarzenegger’s campaigns collected $87,000 of that, and Wilkes’ foundation gave an additional $20,000 to nonprofit organizations Schwarzenegger had founded.

In 2003, Wilkes co-chaired Schwarzenegger’s fundraising operation in San Diego County. But in March of this year, Schwarzenegger insisted he didn’t know Wilkes, adding that he was unaware of the details of Wilkes’ appointment to the racetrack boards. “Sometimes I don’t get involved in those kinds of decisions,” the governor said.

Although Wilkes was a large donor to Schwarzenegger, his contributions to other state candidates were modest, but they often went to up-and-comers.

Wilkes and his associates gave $16,800 to Assemblyman George Plescia (R-San Diego), who recently became the chamber’s GOP leader. Plescia’s wife is Melissa Dollaghan, who worked as Wilkes’ head of government affairs until she took a leave last summer, when the Cunningham scandal broke. Dollaghan quit in the fall.

Dollaghan declined to comment. “It was her feeling that [Wilkes] kept everything close to the vest,” Plescia said. Wilkes never asked him for anything in Sacramento, the assemblyman added.

What is clear is that Cunningham played a key role in the business affairs of Wilkes and the contractor’s associate Mitchell Wade.

Prosecutors described Cunningham as a congressman for hire who bullied Pentagon bureaucrats to approve contracts for co-conspirator No. 1 and for Wade. In February, Wade pleaded guilty to giving Cunningham more than $1 million in bribes in exchange for government contracts. Wade, who is awaiting sentencing, could not be reached for comment.

In 1999, after the Pentagon raised allegations about Wilkes’ overbilling the government, he turned to Wade to act on his behalf to win new contracts, according to a source close to the Cunningham investigation. Wade had worked for the Defense Intelligence Agency during the first Iraq war and was hired by Wilkes in 1999 as a consultant.

Wade had set up a Washington-based firm, MZM Inc., to provide “computer consulting services,” but it had no revenue until it was hired by Wilkes, according to company records.

In 2002, Cunningham appropriated more than $6 million in Pentagon funds to pay MZM for data storage systems, and the job was subcontracted to Wilkes. ADCS delivered $700,000 worth of computer equipment to the Pentagon and Wilkes turned a $4.8-million profit, while Wade kept $678,000. According to prosecutors in the Cunningham case, MZM overbilled the government.

The contracts multiplied, and Wade began to do well on his own. MZM has received more than $150 million in government work since 2002.

As federal dollars poured into MZM, Wade rewarded Cunningham more lavishly, and this ultimately led to their downfall. In November 2003 Cunningham sold his home in Del Mar Heights to Wade for $1.68 million. Nine months later, Wade sold the house for a $700,000 loss.

This windfall enabled Cunningham to buy a larger, $2.5-million home in Rancho Santa Fe, a more exclusive area. As part of these real estate transactions, in May 2004 Wilkes paid $525,000 to a mortgage broker, who in turn paid off Cunningham’s home loan, according to legal documents.

In June of 2005, the San Diego Union-Tribune reported on these sweetheart real estate deals, and it led to the federal probe of Cunningham.

In November, as Cunningham prepared to plead guilty to bribery charges, Schwarzenegger’s staff forced Wilkes to resign his racetrack posts.

Wilkes has put his Poway office building up for sale and has laid off most of his staff.