Official Put Price on Favors, U.S. Says

Rep. Randy “Duke” Cunningham (R-San Diego) “demanded and received” a bribe from a defense contractor who paid an inflated price for Cunningham’s home in exchange for official favors, the U.S. attorney’s office alleged in documents filed Thursday.

The allegation was filed as part of a civil lawsuit in which federal prosecutors are attempting to seize Cunningham’s current home in Rancho Santa Fe. It was the first public accusation by federal prosecutors of criminal acts by Cunningham, who has been under investigation by a federal grand jury in San Diego.

Cunningham’s attorneys called the allegation outrageous and denounced prosecutors’ use of a civil lawsuit in advance of a possible criminal indictment as a violation of their client’s rights.

Mark Holscher, one of the lawyers, said the eight-term member of Congress “strongly denies these allegations, and we will contest them in court as soon as the judge permits us to do so.”

Prosecutors declined to comment on the case. But in the documents filed Thursday, they allege that Cunningham and his wife, Nancy, took the illegal gains from the sale of their previous home in Del Mar Heights and used them to buy their current house.

As a result, the new home should be forfeited, much as the government seizes property from drug dealers and other criminals, prosecutors say.

Cunningham “demanded and received” the inflated price from defense contractor Mitchell Wade “in return for being influenced in the performance of his official acts as a public official,” in violation of federal law, prosecutors say in the documents.

Though the filing does not use the word “bribe,” the law the documents cited as having been violated is the one covering bribery and graft. The documents filed by the U.S. attorney’s office also indicate that the Internal Revenue Service is involved in the investigation.

Cunningham sits on two House committees that review the Pentagon budget, and could influence the flow of defense contracts. The filing does not indicate what kind of favors Cunningham allegedly did for Wade.

Wade’s former company, MZM Inc., which Cunningham has said he championed, has received $163 million in federal contracts -- mostly for classified defense projects involving the gathering and analysis of intelligence.

The government’s suit seeking forfeiture of the Cunningham home remains sealed. A hearing is set for Sept. 9 on Cunningham’s demand that the lawsuit be thrown out. One issue at the hearing will be a demand by his lawyers to unseal the suit.

The allegations against him involve the sale of the Del Mar Heights house in November 2003. Wade paid Cunningham $1.67 million for the house, then sold it eight months later for a $700,000 loss.

A month after selling the Del Mar Heights home, the Cunninghams bought a five-bedroom, eight-bathroom house in exclusive Rancho Santa Fe for $2.55 million. Prosecutors allege that the couple made a $1.4-million profit on the Del Mar Heights sale, which they used to “buy up” to Rancho Santa Fe.

After weeks of controversy, Cunningham on July 13 tearfully announced that he would not seek reelection next year and would sell the Rancho Santa Fe house and distribute some of the profits to local charities. The home has been listed for sale at $3.5 million.

Days later, prosecutors in U.S. Atty. Carol Lam’s office in San Diego filed a sealed lawsuit to seize the home. No documents were put in files open to the public.

The lawsuit became public knowledge when a document was filed in the recorder’s office warning prospective buyers of the Rancho Santa Fe home about a pending lawsuit.

If Cunningham is unable to sell the Rancho Santa Fe house, he could have trouble raising funds to hire lawyers. In a related move, he has sought approval from the Federal Election Commission to start a legal defense fund, a common tactic for politicians under investigation.

So far, no criminal charges have been filed in the case. Wade’s company has been sold.

In one of his few public statements, Cunningham has called Wade a close friend. Part of the federal probe involves the fact that Cunningham has lived aboard Wade’s 42-foot boat, renamed the Duke Stir, while in Washington.

Advocacy groups have demanded that Cunningham immediately resign from Congress, but he has refused. Several Republicans are jockeying for their party’s nomination to succeed him in the 50th Congressional District, which covers much of affluent northern San Diego County.

Cunningham’s opponent in last year’s election, Democrat Francine Busby, is seeking her party’s nomination.

Federal agents have raided the headquarters of MZM and the Poway headquarters of a second defense firm. In both cases the companies had contributed to Cunningham’s election campaigns.