Tuesday, November 29, 2005

Republican Congressman Enters Guilty Plea to Bribery Conspiracy and Tax Evasion

San Diego-area Republican Rep. Randy (Duke) Cunningham entered a guilty plea in the U.S. District Court for the Southern District of California to conspiracy and tax evasion charges related to approximately $2.4 million in bribes and benefits he received for steering contracts to two defense contractors from his position on the Defense Subcommittee of the House Appropriations Committee.  Cunningham has been under investigation since earlier in 2005 when newspaper stories revealed that he had sold his house in the San Diego area to Mitchell Wade, a campaign contributor and then-president of MZM Inc., a small defense contractor that had received a number of no-bid contracts from the Pentagon over the past three years (see earlier post here).  While the sale price was $1.6 million, Wade turned around and sold the home for $700,000 less.  As part of its investigation, the government executed search warrants at Cunningham's home and the boat on which he lived in Washington D.C.

According to the Plea Agreement (here), Cunningham conspired with four unidentified conspirators, two of whom were majority owners of defense contractors.  The defense contractors who have been involved in the investigation are MZM, which Wade had a controlling interest in before leaving the company, and ADCS Inc., whose majority owner, Brent Wilkes, had his home searched as part of the investigation.  The other conspirators are from the New York City area and were involved in financial transactions related to paying off the mortgage on Cunningham's Ranch Santa Fe home.  The home sale transaction is one of many items listed as involving improper bribes for Cunningham, which also included multiple payments run through various bank accounts, payments to antique stores for various items purchased by Cunningham, and payment for repair work on his Rolls Royce -- there's something to be said for trying to hide one's new-found wealth while living on a government salary.  None of the payments were disguised as campaign contributions, but instead appear to be naked bribes to obtain contracts during a time when the Pentagon was spending significant funds for the Iraq war.  In addition to the guilty plea, Cunningham agreed to forfeit his home, $1.8 million in cash, and the antiques, which including a sleigh-style bed (!).

The plea agreement includes a Sentencing Guidelines calculation that puts Cunningham's potential sentence at over 10 years (135-168 months), and includes a Sec. 5K1.1 provision that will permit the government to ask for a downward departure if he provides substantial assistance.  Given the fact that there are four unidentified coconspirators mentioned in the plea agreement, this is certainly not the last charge that will be filed in the case.  One question about his usefulness as a witness is the fact that Cunningham asserted his innocence when the investigation first started, and only now is admitting to his wrongdoing.  In a public statement (here) released with the entry of the plea that announced his immediate resignation from Congress, Cunningham stated:

When I announced several months ago that I would not seek re-election, I publicly declared my innocence because I was not strong enough to face the truth. So, I misled my family, staff, friends, colleagues, the public -- even myself. For all of this, I am deeply sorry. The truth is -- I broke the law, concealed my conduct, and disgraced my high office. I know that I will forfeit my freedom, my reputation, my worldly possessions, and most importantly, the trust of my friends and family.

In many cases, it is the elected representative who denies that payments were understood to be bribes, so Cunningham's about-face may not cause the government too many problems in pursuing those who provided the money in exchange for government contracts.  It is much harder to assert that the help provided by a Congressman was not in exchange for payments when the deals involve no-bid transactions that likely skirted government procurement rules.  A San Diego Union-Tribune story (here) discusses the plea agreement. (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2005/11/republican_cong.html

Corruption, Prosecutions, Tax | Permalink

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