Contracting probe could extend to CIA
By Jason Vest
jvest@govexec.com

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Federal investigators in San Diego have made it clear that while just-resigned Rep. Randy "Duke" Cunningham pled guilty last week to taking bribes from defense contractors, their public corruption probe will not stop at Cunningham. Numerous current and retired CIA officials say they will not be surprised if the investigation touches the CIA in general, and its third-ranking official in particular.

"Though everyone has been talking about what Cunningham did for contractors from his position on [the House] Defense Appropriations (subcommittee), you also have to remember that he had a seat on (the Permanent Select Committee on) Intelligence too, which is also a good position to help contractors from, particularly if they want to do business with the CIA," says a veteran CIA officer. "But the real question I think is, if those contractors were doing business with the CIA, did they need Cunningham? And even if they didn't, the question is, even if he didn't do anything, did one the highest-ranking agency officials have any idea what his friends were up to?"

According to past and present CIA officials interviewed over the past month, CIA executive director Kyle "Dusty" Foggo--whose career duties have encompassed letting CIA contracts--has had a long, close personal relationship with two contractors identified (though not explicitly named) in court papers as bribing Cunningham: Brent Wilkes of the Wilkes Corp., whose subsidiaries include defense contractor ADCS; and former ADCS consultant Mitchell Wade, until recently president of defense contractor MZM, Inc. It is a relationship, the CIA officials say (with some putting a particular emphasis on Wilkes), that has increasingly been of concern.

One current and two retired senior CIA officials told Government Executive that (as noted last week by reporter Laura Rozen in The American Prospect's TAPPED blog) the relationship of Wilkes and Foggo--who the CIA's Web site declares is "under cover and cannot be named at this time," even though he is pictured and identified on a federal charity web page--has been a subject of increasing concern by some at Langley.

Another recently-retired senior agency official, while not naming Wilkes or Wade by name, also noted concerns borne out of both personal experience with and reports from colleagues about Foggo. "If you were a case officer and worked with him, you'd be saying to yourself, 'I've got to watch this guy,'" says the former official. "There is one contractor with whom he enjoys a very, very, very close relationship."

According to several of the officers interviewed for this article, Foggo and Wilkes have been friends since at least their college years at San Diego State University in the 1970s, where they were roommates. According to several regulars at Washington's Capital Grille, the two jointly lease one of the restaurant's private wine lockers.

A CIA spokesperson would not comment on any aspect of this story and said Foggo was not available for interviews.

After a brief stint in law enforcement, Foggo entered the CIA through the Presidential Management Intern program, and began work in what was then known as the Directorate of Administration (DA), the CIA organization that, among other things, handled a significant portion of the agency's contracting.

Foggo belonged to the DA's Management General Services unit, whose personnel, while not case officers who directly recruit and oversee spies, nonetheless received the same training as covert-action oriented Directorate of Operations officers.

MGS officers ran operational support programs in the field, a critical job directly below the agency's station chiefs. MGS officers had unique powers, including sole access to and oversight of a station's funds, as well as handling a station's accounting and contracting.

"The MG guy is the station's contracting authority, and is responsible for acquiring whatever a station needs to function, and to keep it running---the glue the holds it all together and gets anyone anything they need," says a veteran logistics officer.

While most federal government contracts are openly solicited, competitively bid and have their details publicly available, by virtue of its mission the CIA is not subject to the same rules. MG officers in particular have historically had great leeway.

"While the process is the same as anywhere else--in theory, you go to the place you can get the best deal--you're not going to find our stuff on the federal schedule, and the payment will come either through a company we set up or some other governmental cover," says a recently-retired MGS veteran. "Historically MG officers have been able to sole-source, and for smaller contracts, in some cases up to the half-million range, have not needed Langley's approval. A lot of smaller sole-source contracts can add up for a contractor."

Prior to becoming executive director, Foggo's postings included stations in Latin American and Europe. One of his first assignments was Honduras in the early 1980s, where one now-retired CIA officer recalls seeing him at least once with a visiting Brent Wilkes, who was there with "some kind of congressional delegation" in a "kind of vague" capacity.

Directly before coming executive director, Foggo was chief of the CIA's support base in Germany, which provides its Middle East stations, including Baghdad, with logistical support. While there, according to a recently retired CIA official, he let at least one contract to Wilkes. A veteran CIA administrative officer also noted that while Foggo has spent most of his career as an MGS officer, he also did a stint in the agency's Directorate of Science and Technology, "where a lot of really big contracts are handled."

CLARIFICATION: The original version of this article should have indicated that a CIA spokesperson was offered the opportunity to comment on the story for the record and declined. The story has been updated to reflect this fact.

CA-4 Doolittle May Have Done-A-Lot
by shadowgov
Mon Dec 26, 2005 at 01:06:06 PM PDT

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Powerful California Congressman John Doolittle (CA-4) is finding himself under some intense scrutiny in his own district for his ties to Republican rainmaker, Jack Abramoff and Duke Cunningham money man, Brent Wilkes.

The Auburn Journal takes a close look at Doolittle's connections and denials. The Journal points out that Doolittle's links with the growing circle of Republican scandals is finally starting to resonate in his eastern California district.

"Tied to the headline-grabbing Abramoff scandal, linked by his close association to embattled former House Majority Leader Tom DeLay, and with funding for the political action committee he administers coming from co-conspirators in the "Duke" Cunningham political corruption case, Doolittle has become embroiled with dozens of other lawmakers in a series of developments that threaten to bring down the Republican House majority his party has held since the mid-1990s.

The brewing storm
(U.S. Rep. John) Doolittle is linked to scandals swirling around three top Republican figures:

Randy Duke Cunningham: Resigned from House seat after admitting guilt in allegations of $2.4 million in bribery. Brent Wilkes, identified in court documents as a co-conspirator in that case, also gave Doolittle $46,000.

Tom DeLay: Former House majority leader was indicted by a Texas prosecutor on charges including the laundering of corporate contributions through a PAC to other candidates. Doolittle has contributed to DeLays legal fund and staunchly defends him.

Jack Abramoff: Lobbyist is being investigated by a grand jury regarding gifts to congressmen, allegedly as repayment for political favors. Doolittles wife and former chief of staff have both worked for Abramoff, and Doolittle has taken donations from him.

Doolittle draws increased scrutiny
Sunday, January 1, 2006 Last modified: Monday, December 26, 2005 12:35 AM PST
By: Gus Thomson, Journal Staff Writer

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Unflappable while facing election challenges from underdog Democrats and moderate, lightly supported Republican hopefuls in his home district, veteran U.S. Rep. John Doolittle, R-Roseville, is now coming under fire in the larger national political arena.

Tied to the headline-grabbing Abramoff scandal, linked by his close association to embattled former House Majority Leader Tom DeLay, and with funding for the political action committee he administers coming from co-conspirators in the "Duke" Cunningham political corruption case, Doolittle has become embroiled with dozens of other lawmakers in a series of developments that threaten to bring down the Republican House majority his party has held since the mid-1990s.

Thousands of miles away from the growing political storm clouds in Washington, D.C., Auburn-area residents are beginning to hear more about Doolittle's connections to a series of developments linking lobbyists and politicians. Doolittle has served as the District 4 congressman since 1991, rising to positions on the influential Appropriations Committee and as Republican conference secretary.

For Doolittle's home district, which is based around growing South Placer, his influence as a powerful Republican lawmaker has reaped funding for local projects, including tens of millions of dollars for transportation improvements, a sorely needed wastewater treatment system, and Auburn projects like the park preserve and performing arts center.

Doolittle's connections to main players in brewing scandals haven't necessarily been on the radar screen of people in Auburn, with reports coming out of Washington focusing on DeLay, Cunningham and lobbyist Jack Abramoff.

Pam Wilson, a 35-year Tahoe City resident who recently moved to Auburn, said she hadn't been following recent reports on the corruption scandals that started this past fall to feature Doolittle's name more prominently.

"Obviously, it's possible for anyone to become involved," Wilson said.

Rod Comstock, an Auburn gardener, said he's been following reports and sees the political problems as an offshoot of a good ol' boy system in Washington.

"They're in the limelight with people watching every move they make," Comstock said. "Sooner or later you're going to get caught. Like the saying goes, nobody's above the law."

Doolittle, through spokesmen, adamantly downplays the links to politicians and lobbyists who are either under investigation by a grand jury or the Justice Department or, in the case of Cunningham, has already pleaded guilty to corruption-related charges.

On the grand jury investigation of Abramoff, Doolittle press secretary Laura Blackann said any suggestion the District 4 congressman had some improper involvement in matters recently disclosed about the lobbyist is based on irresponsible speculation by the media and completely without merit.

"Congressman Doolittle has not been contacted by the Justice Department or FBI nor has he received a subpoena in regard to the grand jury investigation of Jack Abramoff," Blackann said.

Doolittle hasn't received a subpoena related to other matters either, she added.

A examination of reports coming out of Washington, San Diego and Texas, as well as Doolittle campaign and political action committee filings, shows a politician whose rise in influence and power has been matched with inflows of cash from lobbyists and business owners with a stake in currying favor with the Northern California Republican. That higher profile has also led to intense scrutiny by a Washington press corps routing out information on several scandals involving the Bush administration and congressional corruption.

The nation's leading newspapers, including the New York Times, Washington Post and Los Angeles Times have all weighed in, with the Post quoting unnamed sources close to the Abramoff investigation saying that "Abramoff's connections to Doolittle are also of interest" to investigators and prosecutors.

The Post report outlines the connections between the congressman and the lobbyist that the unnamed sources state are now under Justice Department scrutiny. Kevin Ring, Doolittle's chief of staff in the mid-1990s and now a lobbyist for the city of Lincoln, worked for Abramoff. Doolittle's wife, Julie, also worked for Abramoff and his firm raising funds for a charity the lobbyist had created.

"Two sources close to the investigation said that Ring, while working from Abramoff, was an intermediary in the hiring of Julie Doolittle's firm, Sierra Dominion Financial Solutions Inc., which last year received a subpoena from the grand jury investigating Abramoff," the Post reported.

Doolittle Chief of Staff Richard Robinson defended Julie Doolittle and Sierra Dominion's fund-raising activities. Describing Julie Doolittle as "one of the most capable and hardest-working people I know," Robinson characterized Sierra Dominion as an effective small business owned by the congressman's wife that provides marketing, event planning, fundraising and related services to several clients, including her husband's Superior California Fed Leadership PAC.

Political Action Committees, or PACs, are political committees organized to raise and spend money to support and oppose candidates. A part of American politics since 1944, they can support labor, business or ideological views. PACs can give $5,000 to a candidate's committee each election.

"Consistent with other fund raisers, Sierra Dominion receives a commission on all funds it is directly involved in raising," Robinson said. "Through Julie Doolittle's highly skilled personal efforts as part of Sierra Dominion work, she has caused the congressman's leadership PAC to be increasingly successful in raising funds for the preservation of our Republican majority."

Doolittle had tried several other Washington-based PAC fundraisers in the past but none matched Sierra Dominion's hard work and effectiveness, Robinson said.

"Julie has significant experience in fund-raising and event planning and has performed similar duties for several clients," he said.

NATIONAL MEDIA ATTENTION

While Doolittle is getting attention from the Post, an NBC television report last week concentrating on the possibility of a plea bargain with Abramoff and the Justice Department stated Rep. Robert Ney, R-Ohio, was the focus of a related bribery investigation. No mention was made about Doolittle in the NBC report.

Earlier this month, a group of several news outlets including The Associated Press, stated that two defense contractors who prosecutors allege bribed ex-Rep. Randy "Duke" Cunningham with everything from a Rolls-Royce to an antique commode - a total of $2.4 million - also donated funds to Doolittle, DeLay and other key lawmakers.

Doolittle, a member of the Appropriations Committee with Cunningham, took in $46,000 from Poway, Calif. defense contractor Brent Wilkes, his wife and his associates for his campaign or PAC. Wilkes has been identified in court documents as a co-conspirator.

The Associated Press report stated there is no indication the donations to Doolittle or the Doolittle PAC were improper. It also stated prosecutors have not suggested that the investigation into Cunningham's dealings involves Doolittle or other politicians. But the San Diego Union-Tribune subsequently reported that Texas prosecutors working on a case that alleges DeLay funneled $190,000 in corporate contributions through a PAC to seven Republican state Legislature candidates have issued subpoenas to Wilkes, his business associates and two companies owned by Wilkes. The Union reported that the House defense appropriations subcommittee Cunningham sat on "helped create programs that resulted in at least $95 million in contracts " for ADCS Inc., one of the Wilkes companies.

Doolittle continues to staunchly defend DeLay and has contributed $15,000 to his defense fund.

Blackann described DeLay as "an effective Republican leader who has become a target of baseless political attacks,"

"Mr. DeLay has been brought to trial by a partisan district attorney who is abusing his office in order to score political points and raise funds for liberal Democrats," Blackann said.

Several of the lawmakers who accepted money from Wilkes and associates have said they'll divest the donations by giving the money to charities. Robinson said Doolittle's stance is he's done nothing wrong and has no intention of returning any campaign contributions that were made in a lawful or ethical manner.

Funding from Wilkes and associates primarily went to the Doolittle-controlled Superior California Fed Leadership PAC.

Federal filings show Brent Wilkes and his wife, Regina Wilkes both contributing $5,000 to the Superior California fund on Feb. 10, 2004 - part of $46,000 in contributions that were made during the 2003-04 funding cycle by Wilkes and associates. A total of $496,941 in contributions to the fund was made from all sources during the two-year cycle.

During the same 2003-2004 election funding cycle, Sierra Dominion Financial Solutions received $74,939 in what are described in the filing as fundraising commissions. The total includes a payment of $4,500 received five days after the Wilkes' donations. Over the 24-month filing period, Julie Doolittle would receive eight payments of $4,200 or more, plus several smaller payments.

Robinson said Julie Doolittle receives commissions instead of a salary on all funds she raises.

"Sierra Dominion's compensation is based entirely on performance in that it receives a percentage in what it is directly involved in raising," Robinson said. "This arrangement is not only consistent with that of other fund raisers but is designed to avoid the appearance that Sierra Dominion is compensated for anything other than its tireless and effective work. Any suggestion otherwise is completely without merit."

Congressional ethics rules require members to avoid even the appearance of a conflict of interest when accepting donations.

GAMING LETTER QUESTIONED

The Abramoff link to Doolittle was amplified last month when reports surfaced that the District 4 congressman was among a group of 36 lawmakers who took donations from the lobbyist and Indian tribal gaming clients while mounting a letter-writing campaign to block a potential competitor. The Associated Press reported Doolittle received $1,000 from Abramoff several weeks before he signed onto a letter, then took another $16,000 from two of Abramoff's casino tribal clients about two months later. "By year's end, Doolittle also had used Abramoff's restaurant to cater a campaign event and received an additional $15,000 from tribes," the AP reported.

Blackann said it's no surprise that Doolittle would sign a letter opposing Indian gaming "since he has an established 25-year record of fighting against the expansion of all forms of gaming her in California and across the country."

"To suggest the reason he signed a letter along with 35 other members of Congress opposing the establishment of a casino was because of anything other than his long-held anti-gaming position is both ludicrous and insulting," Blackann said.

Sierra Dominion received a subpoena for records regarding its services to Greenberg Traurig (Abramoff's lobbying firm) and Jack Abramoff and cooperated fully by making its records available, Blackann said.

"In no way did Sierra Dominion's work for Greenberg Traurig or Jack Abramoff have any relationship to Congressman Doolittle's official duties as a member of the House of Representatives," Blackann said.

Pete McCloskey, a Republican congressman from 1967 to 1982 for the Silicon Valley who owns property in Placer County, said that while the revelations coming from Washington are important, the developments have yet to be absorbed by local voters. Alarmed by what he considers the "monstrosity" in lobbying connections with Republican officeholders, he formed a Revolt of the Elders group of former Republican lawmakers to block a move to change House rules to protect DeLay from losing his leadership post if indicted.

"Generally, voters have a dim view regarding what goes on in the Beltway and don't care," McCloskey said. "But if there's one thing the Republican Party has stood for, it's fiscal responsibility. If Doolittle gets indicted, that will ring home."

The Journal's Gus Thomson can be reached at gust@goldcountrymedia.com.

Workers say MZM founder pressed them to give to PAC
By Marcus Stern, COPLEY NEWS SERVICE
June 22, 2005

LINK

WASHINGTON Mitchell Wade, founder of the defense contracting firm MZM Inc., pressured employees to donate to a political fund that benefited Rep. Randy "Duke" Cunningham and other members of Congress, according to three former employees of the company.

Wade, who took a $700,000 loss on the purchase of Cunningham's Del Mar home and allows the congressman to stay on his yacht while in Washington, demanded employees make donations to the company's political action committee, MZM PAC, they said.
"By the spring of '02, Mitch was twisting employees' arms to donate to his MZM PAC," said one former employee. "We were called in and told basically either donate to the MZM PAC or we would be fired."

Many companies have PACs, but campaign finance laws prohibit employers from pressuring workers to contribute to the PAC. They may encourage contributions, but not compel them.

"It is illegal to solicit campaign contributions for the company's political action committee by the use of threats, force or threat of job reprisal," said Larry Noble, former general counsel of the Federal Election Commission and currently director of the Center for Responsive Politics, a nonpartisan organization that tracks the flow of money in politics.

"If they say to somebody, 'You either give or you are going to be fired,' they have violated the law," Noble said.

MZM officials did not respond to requests for comment. In the past week, Wade resigned the posts of president and chief executive officer of the company, turning over those duties to Chief Operating Officer Frank Bragg, company sources said. Wade remains the primary shareholder of the privately held, Nevada-licensed company, sources added.

The resignations came after the Union-Tribune reported that Wade had purchased and then sold Cunningham's Del Mar house at a loss of $700,000 and has allowed the Rancho Santa Fe Republican to stay aboard his yacht, called the Duke-Stir, while in the nation's capital. The FBI and a federal grand jury are investigating the matter.

Since the initial disclosure of the 2003 home sale, Cunningham has released only two brief statements on his ties to Wade, saying that the home sale was "aboveboard" and that he has paid an undisclosed amount for use of the yacht.

Wade has made no public comment since his ties to Cunningham were first reported.

Wade operates out of the company headquarters, a four-story townhouse in the Dupont Circle area of Washington. About 20 to 25 employees work in the building, according to the former employees. They say the company has grown to more than 400 employees, with much of the expansion coming in the past two years.

Little public information exists on what MZM - a name based on the first names of Wade's children Matthew, Zachary and Morgan - does for the government. Former employees, however, say much of its work is with three defense intelligence operations:

Counter Intelligence Field Activity, a highly secretive program created in 2002 by a Pentagon directive that focuses on gathering intelligence to avert attacks like the ones on Sept. 11, 2001.

The Army National Ground Intelligence Center in Charlottesville, Va., whose mission is to provide soldiers with battlefield intelligence.

The U.S. Army Intelligence and Security Command at Ft. Belvoir, Va., just outside Washington, which also provides battlefield intelligence.

MZM has been seeking to increase its contracts with the Central Command, which oversees military operations in Iraq and Afghanistan, and the Special Operations Command, both based at MacDill Air Force Base in Tampa, Fla., according to former employees.

The three former MZM employees who said Wade pressured them and others to donate money to the company PAC declined to be identified, saying they feared for their careers if their names were disclosed. All continue to work in the military and intelligence fields.

They and other former MZM employees questioned the way Wade solicited contracts from Defense Department intelligence agencies during the time they worked for the company.

They also expressed concerns about Wade's dealings with three House members who received a large portion of the money disbursed by MZM's PAC. The three = all Republicans - are Cunningham and Reps. Virgil Goode of Virginia and Katherine Harris of Florida.

MZM's PAC donated $17,000 to Cunningham from 2000 to 2004. Donations included $12,000 to "Friends of Duke Cunningham" and $5,000 to his leadership PAC, the American Prosperity PAC. During the same period, MZM PAC gave Goode $11,000 and Harris $10,000.

Neither Goode's nor Harris' offices returned calls seeking comment.

Many companies form PACs to raise and spend money to help elect or defeat political candidates. Individuals also may contribute separately. PACs are not allowed to give more than $5,000 to any one candidate per election. When a primary and general election are involved, PACs may give $5,000 per candidate in each, for a total of $10,000 per election cycle. Individuals may give up to $4,000 per election cycle.

In addition to the MZM PAC, MZM officials also made contributions to the House members' campaigns. Wade gave Cunningham $6,000 between 2000 and 2004.

MZM officials and their family members gave Harris, who ran for Congress in 2002, a total of $44,000 during 2003 and 2004. Goode received a total of $27,851 between 2000 and 2004.

MZM senior employees and family members gave Goode an additional $44,625 in March, according to information compiled by the Center for Responsive Politics.

MZM has a facility in Goode's rural Virginia district, not far from the Army National Ground Intelligence Center, which is one of MZM's key customers.

MZM is also planning to buy a facility in Harris' district, where it can be close to two of its other customers, the U.S. Central Command and the Special Operations Command, which are in a neighboring congressional district.

Cunningham is on the Permanent Select Committee on Intelligence and the defense appropriations subcommittee, which puts him in position to influence the awarding of defense intelligence contracts.

MZM had 56 such contracts totaling $68,645,909 in fiscal year 2004, according to Keith Ashdown, an analyst with Taxpayers for Common Sense. One of those contracts is to provide interpreters in Iraq. For the most part, the contracts were awarded to MZM without competition through a process known as "blanket purchase agreements."

Ashdown echoed the comments of former MZM employees in saying Wade strategically targeted MZM's donations.

"A lot of people will throw a lot of money at a lot of different people," Ashdown said. Wade's "strategy was, 'I need to make friends with a few very influential lawmakers and really, really schmooze and coddle them and that's how I'm going to make my money.' And that's what he did.

"The first person is Cunningham, a senior guy on the (defense appropriations) committee, and he helps them get business. Then they go to another guy on the (defense appropriations) committee, Goode, who's more junior but has the benefit of getting a facility in his district. And then they go to Katherine Harris, who isn't on the committee but needs lots of money for her Senate race and would be bringing business and new jobs to her area," Ashdown said.

Harris plans to run for Senate next year.

One of the former MZM employees quoted Wade as describing his congressional strategy this way: "The only people I want to work with are people I give checks to. I own them."

Another former employee said Wade used letters to remind employees before their employment anniversaries to contribute a designated amount to the company PAC. The specific amount was based on their level of seniority in the company, with more senior officials expected to give $1,000 each and less senior employees expected to give $500, the former official said.

A third former employee described being rounded up along with other employees one afternoon in the company's Washington headquarters and told to write a check, with the political recipient standing by. The former employee wouldn't give the name of the politician receiving the donations.

"When (employers) solicit contributions to the political action committee, they are supposed to say that the contribution is voluntary," said Noble, the former general counsel of the Federal Elections Commission. "They are allowed to suggest an amount to give, but they have to say you can give more or less, or nothing at all.

"And they have to say that there will be no job reprisals for not giving. So even being silent on it and soliciting contributions is, actually, technically a violation of the law."

Citizens for Responsibility and Ethics in Washington, a group with ties to the Democratic Party, lodged a complaint yesterday with the Federal Election Commission after a Copley News Service story posted on the Union-Tribune's Web site ' SignOnSanDiego.com ' disclosed the allegations that Wade had pressured employees to contribute to MZM PAC.

Copley News Service correspondent Jerry Kammer contributed to this report.

Cunningham Woes Could Touch Wife
By John Bresnahan, Roll Call, December 5, 2005

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Nancy Cunningham, wife of former Rep. Duke Cunningham (R-Calif.), faces a legal struggle to retain property forfeited to the government in the wake of her husband's guilty plea in a corruption case  and possibly even criminal charges, according to attorneys close to the investigation.

Duke Cunningham, who formally resigned from the House on Thursday, pleaded guilty last Monday to felony counts of accepting at least $2.4 million in bribes, as well as fraud and tax evasion charges. He faces as many as 10 years in prison when he is sentenced on Feb. 27.

As part of his plea agreement with the U.S. Attorney's office in southern California, Cunningham forfeited his interest in the couple's $2.4 million home in Rancho Santa Fe, Calif. He also agreed to turn over $1.85 million in cash and dozens of antiques that he had received from several unindicted co-conspirators in the case.

But the plea agreement does not cover Nancy Cunningham, according to sources close to the case.

Cunningham's lawyers were intent on protecting their client from an even harsher jail sentence than he will now receive  and that decision now leaves his wife in a precarious legal and financial position.

Prosecutors had considered charging Cunningham with money laundering, which carries a 20-year jail sentence. The scale of the tax-evasion Cunningham pleaded guilty to  a failure to report at least $2 million received from defense contractors during a five-year period  could have resulted in as much as 20 years in federal prison. The maximum sentence for accepting bribes is 15 years.

But Cunningham, who turns 64 this week, has suffered from skin and prostate cancer in the past, and a jail term of up to 20 years would be considered a "death sentence," said one source close to the ex-lawmaker. That factor weighed heavily on Cunningham and his legal team, the source said.

Because the Cunninghams filed joint tax returns, Nancy Cunningham, an administrator in the Encinitas Union School District, is now open to potential criminal prosecution on tax-evasion charges, according to lawyers familiar with the government's probe.

At a minimum, the couple will be required to pay taxes on at least $2 million in income that was not declared, plus any penalties or interest. That's because the Cunninghams, as part of the ex-lawmaker's plea deal, will have to refile amended tax returns for the years 2000 to 2005.

Duke Cunningham will still receive his military and Congressional pensions even while imprisoned, although the plea agreement essentially leaves him penniless.

The scope of Nancy Cunningham's personal legal jeopardy is less clear. Making a criminal tax case against her will not be easy, said Scott Michael, a tax law specialist with the law firm Caplin & Drysdale.

Michael said prosecutors must prove that Nancy Cunningham intentionally sought to avoid paying taxes when she signed the couple's tax returns, and that she was aware that they, as a couple, received income that was not being reported to the government.

Michael said that Duke Cunningham's agreement to plead guilty to tax evasion would not necessarily open her up to criminal prosecution. "The government can't simply bootstrap a case on her based upon the case against him," Michael said.

On the civil side, Section 6015 of the Internal Revenue Code says that married taxpayers who file joint returns are "jointly and individually responsible" for any taxes due, or interest or penalties, even if they are later divorced.

Nancy Cunningham could seek "innocent spouse" relief for their joint tax liability if she can meet several tests, including whether the "erroneous items" were her fault or her husband's, or if she did not know, and had no reason to know, about activities that led to the understatement of taxes owed on their joint returns. She also could argue that it would be "unfair" to hold her responsible for any tax evasion by them as a couple.

If Nancy Cunningham avoids prosecution on tax charges  a decision that is up to the discretion of the U.S. Attorney's office in San Diego and the tax division of the Justice Department  it is uncertain whether she can protect assets she held jointly with her husband from seizure by the government.

Nancy Cunningham's lawyer, Michael Attanasio of the San Diego firm Cooley Godward, said his client did not forfeit her rights to the couple's home as part of her husband's plea deal.

"Despite [Nov. 28's] sad events, Mrs. Cunningham will continue to pursue and protect her legitimate property rights in the Rancho Santa Fe home," Attanasio said. Attanasio was retained by Nancy Cunningham when the government began civil forfeiture proceedings against the couple's Rancho Santa Fe home earlier this year.

Attanasio declined to estimate the financial value of those interests, but it would likely be based on the fair market value of the couple's previous residence in Del Mar, Calif. That home was sold to a defense contractor for an inflated price of $1.675 million in November 2003. The government charged that the contractor overpaid for the Del Mar home by as much as $700,000, which the prosecutors characterized as a bribe to Cunningham.

The Cunninghams then used $1.4 million from the sale of the Del Mar home to help purchase the Rancho Santa Fe residence. Two defense contractors gave Cunningham an additional $1.1 million to pay of the mortgage on the second home. As part of the plea deal with Cunningham, the Rancho Santa Fe house will be seized and sold off by the government, although the timetable for that action is still unclear.

If the true value of the Del Mar home was in the $950,000 to $975,000 range, minus any mortgage or other debts on the property, as the government declared in its plea deal with Cunningham, Nancy Cunningham may try to claim half of that smaller total as rightfully belonging to her.

Nancy Cunningham's attorneys have already argued in civil forfeiture proceedings brought by federal prosecutors against the Rancho Santa Fe home that she was "an innocent owner" who was not aware of any criminal activity by her husband.

Under the "innocent owner" defense in civil forfeiture cases, Nancy Cunningham would not lose her rights to a portion of the Rancho Santa Fe home. She would have to prove that she was unaware of the conduct by her husband that gave rise to the forfeiture or, alternatively, that she did "all that reasonably could be expected" if she was aware of any criminal conduct to end it, at least as far as any such activities directly affected her.

But in a government brief filed on Oct. 7 in the civil forfeiture case against the Cunninghams  a brief filed before Duke Cunningham pled guilty to any crime  federal prosecutors clearly signaled their view that Nancy Cunningham's "innocent owner" claim was spurious.

"Despite this singular focus ... Ms. Cunningham fails to acknowledge that she bears the burden of proving this purportedly straightforward claim," prosecutors wrote. "In addition, Ms. Cunningham omits any reference to what this requisite proof entails. Significantly, it does not merely require that she was not aware that a crime was committed in connection with her and her husband's acquisition of the [Rancho Santa Fe home]. Rather, it requires her to prove that she 'did not know of the conduct giving rise to forfeiture.' Ms. Cunningham has not only failed to meet this burden, she has failed to give this Court any basis to believe that she could ever meet this burden."

But for now, federal prosecutors clearly have other targets in mind than Nancy Cunningham.

Federal officials have refused to rule out the possibility that other lawmakers, Capitol Hill aides and lobbyists could be charged in the case.

One source familiar with the six-month probe said it was "too soon to tell" if any other Members will become entangled in the investigation. "We just can't tell at this point," the source said.

Sources close to the probe, speaking on the condition of anonymity, said prosecutors expect to soon file charges against several of Cunningham's alleged co-conspirators.

Mitchell Wade, former owner of defense contractor MZM Inc., and Brent Wilkes, president of defense contractor ADCS Inc., have been identified as two of the unindicted co-conspirators mentioned in Cunningham's plea agreement, according to corporate records and media reports. The two men allegedly funneled more than $2 million in payments to Cunningham, who in return helped them secure tens of millions of dollars worth of government contracts.

Two other individuals, believed to be New York businessman Thomas Kontogiannis and John Michael, the nephew of Kontogiannis' wife, may also become targets of federal charges.

Kontogiannis bought a boat from Cunningham for $600,000, although the lawmaker continued to hold the legal title to the vessel in his own name. Kontogiannis later sought Cunningham's help in obtaining a presidential pardon over his bribery conviction in a 2002 school bribery case.

Michael is the president of a mortgage firm that financed Cunningham's purchases of the Rancho Santa Fe home and a condo in Arlington, Va.

Randy Scandals

Wade Campaign Contributions

Two Defense Contractors at the Center of Ex-Rep. Randy "Duke" Cunningham's Bribery Case "Helped" Other Lawmakers

Thomas Kontogiannis is Implicated in the Bribe Probe of Former Representative Randy Cunningham of California