US: FBI Investigate Business Ties Between Defense Cntractor and Congressman

WASHINGTON - The FBI has opened an inquiry into Rep. Randy "Duke" Cunningham's 2003 sale of his Del Mar house to a defense contractor, who later sold it at a $700,000 loss, a Justice Department official said yesterday.

The action comes amid fresh signs of unusual personal ties between Cunningham and the defense contractor, who named a 42-foot yacht after the Rancho Santa Fe Republican and turned it over to him to use while in Washington.

The Justice Department official, who spoke on the condition that he not be identified because of the inquiry's preliminary nature, would not comment about its scope. However, the head of the FBI office in San Diego had reflected the agency's curiosity a day earlier.

"We are very interested in what has been reported to date, and we welcome more information," Dan Dzwilewski, special agent in charge of the FBI's San Diego office, said Wednesday. "Public corruption matters represent one of the highest priorities of the FBI."

Cunningham's office said yesterday it didn't know of any probe.

"We are not aware of any inquiries at this point," said Mark Olson, Cunningham's spokesman.

Cunningham, a member of the House defense appropriations subcommittee and the Permanent Select Committee on Intelligence, has acknowledged that he has supported the Washington-based defense contractor, MZM Inc., in its efforts to win tens of millions of dollars in federal contracts from the Defense Department. Much of the work has been in the intelligence arena.

Cunningham has portrayed the house deal as "aboveboard," although ethics experts and real estate professionals have said the procedures used in the transaction and its result - an apparent $700,000 windfall to Cunningham - raise serious questions.

Cunningham denied that he is a particularly good friend of MZM owner Mitchell Wade, saying last week, "No more than I am with (Qualcomm founder) Irwin Jacobs or (Titan Corp. founder) Gene Ray or any of the other CEOs."

However, Cunningham has been living aboard a 42-foot yacht at the Capital Yacht Club along the banks of the Potomac River. Wade owns the yacht, named the Duke-Stir, according to U.S. Coast Guard records. The name appears to be a play on Cunningham's nickname.

Following a news report, Cunningham's office released a one-paragraph statement under his name yesterday, saying, "I am putting information and records together so that you will know how much I pay to stay there, and you will see that everything we've done is appropriate."

Cunningham previously lived in the same slip aboard a 65-foot yacht called the Kelly C. Coast Guard records list Cunningham as the owner of the Kelly C.

In 1998, when Cunningham was living aboard the Kelly C, he used his position on the defense appropriations subcommittee, which oversees the District of Columbia's budget, to earmark $3 million to refurbish the waterfront where the yacht was docked.

Shortly after Congress approved the funding, Cunningham told Copley News Service he was fulfilling his duties as a member of the subcommittee.

It was not, he said then, because the beautification project would benefit an area he calls home when he is working in the nation's capital. It was, he said, because then-Speaker Newt Gingrich "said he wants to make D.C. a shining city, and so I said, 'OK, . . . I want to clean up the waterfront' . . . not for Duke Cunningham," he added. "I haven't got a nickel invested."

As Cunningham's office tries to deal with questions about Wade's yacht, a controversy continues to swirl around the sale of the congressman's Del Mar house. Real estate professionals in San Diego have questioned the sale's circumstances, saying their review of the comparable sales do not support the price that Wade paid Cunningham in November 2003.

Wade purchased the house after seeing a list of comparable home sales in the area, according to Cunningham, who characterized the sale as "aboveboard" by saying that a list of comparable homes was provided.

A broad list of home sales during the approximate period of the sale and in the approximate geographic area ranges between $700,000 and $1.7 million.

However, several San Diego Realtors and appraisers who reviewed the Multiple Listing Service records during the period said the comps, which include pictures of the interior and exterior of the homes, show that the house was worth less than $1 million when Wade paid Cunningham $1,675,000.

"There is no logical explanation of comps that could have supported a value of $1,675,000 in November 2003," San Diego real estate appraiser Todd Lackner said after reviewing the records. "There was only one house sale that sold in this price range for $1,665,000 on June 11, 2003. This was an incredibly superior property. The true comps in November 2003 would have been closer to the lower $900,000 range."

Wade put the house back on the market for $1,680,000 in November 2003 during a period when houses frequently were drawing multiple bids above the asking price as soon as they were placed for sale. However, the Del Mar house stayed on the market for more than eight months before selling in October 2004 for $975,000.

After reviewing the comps, Realtor Jacque Baker of Prudential Cal Realty put the value of Cunningham's Del Mar home in November 2003 at "less than $1 million," citing two properties of roughly the same size that sold for about that price even though they had upgrades - and, in one case, panoramic ocean views - which Cunningham's house did not.

Cunningham defended the transaction, saying an independent source had set the asking price at $1,675,000. Wade, he added, accepted the asking price after looking at comps provided.

The Realtor who set the price and provided the comps, Elizabeth Todd of Willis Allen Co. in Del Mar, has been one of Cunningham's longtime political contributors, as her husband, Whitney, and her husband's late father, Richard, have been.

While Todd furnished the asking price and the comps, she was not officially a party to the transaction, which was a private deal without Realtor representation on either side.

However, immediately after the sale of the Del Mar house, Cunningham hired Todd, who received her real estate license in April 2002, to help him buy a $2.55 million estate in Rancho Santa Fe. That purchase was her first real estate transaction, according to California real estate records.

Meanwhile, a spokeswoman for the Democratic Congressional Campaign Committee said yesterday that the organization is looking closely at targeting Cunningham's seat in next year's election.

"This certainly adds to his vulnerability," spokeswoman Sarah Feinberg said of Cunningham's house transaction.

"It's fair to say we're looking closely at the district and talking to possible Democratic candidates, and we believe it's a district we can look at winning."

Cunningham's 50th Congressional District, which is heavily Republican, has long been considered safe from a Democratic challenger.

• 174 War & Disaster Profiteers Campaign