Cunningham grand jury focuses on yacht club

By Onell R. Soto
July 20, 2005

A federal grand jury in San Diego heard testimony yesterday from two officers and a worker from the yacht club in Washington, D.C., where Rep. Randy "Duke" Cunningham lived on a defense contractor's boat for more than a year until moving out under a cloud of suspicion.
The Capital Yacht Club, a few blocks from Capitol Hill, is also where Cunningham lived aboard his own boat before selling it for a $400,000 profit to a Long Island developer whose family financed a couple of his real estate transactions.

The developer said he sought Cunningham's advice on seeking a presidential pardon for his conviction in a kickback scheme, which he later decided not to pursue.

A federal task force that includes agents from the U.S. Attorney's Offices in San Diego and Washington, D.C., the FBI, the Internal Revenue Service and the Department of Defense is investigating the congressman's dealings, authorities said.

The investigation was launched after articles inThe San Diego Union-Tribune raised questions about Cunningham's sale of his Del Mar-area home to the defense contractor, who later sold it for a loss.

The prosecutors handling the case here for the U.S. Attorney's Office wouldn't comment about the investigation and the witnesses wouldn't discuss their testimony.

"I have to decline to comment," said Robert McKeon, who serves as commodore, the club's top officer.

"No comment, sir," said Dockmaster Kelvin Lee.

Rear Commodore Scott Schramm, who sold the yacht to Wade, testified for about two hours and quickly walked away with an IRS agent by his side before a reporter could approach.

A fourth witness wouldn't identify himself, saying he doesn't "talk out of school."

The grand jury's investigation began after stories were published about Cunningham selling his house in November 2003 for $1.68 million to Mitchell Wade, a defense contractor, who less than a year later sold it for a $700,000 loss.

Cunningham used the proceeds to buy a $2.55 million home in Rancho Santa Fe.

Wade's company has been awarded $163 million in federal contracts since 2002.

Cunningham, a member of the subcommittee that funds the Pentagon, said he considers Wade a friend and advocated for his business the same way he has backed other defense contractors.

None of the witnesses who testified yesterday had lawyers with them. Witnesses can't testify with a lawyer by their side, but can consult with them outside the jury room.

Witnesses who can't afford representation also may get government-paid lawyers if prosecutors tell them they are targets of a criminal investigation.

There are 23 members on a federal grand jury and 12 must vote in favor of indictment before criminal charges can be brought. Grand juries also may conclude there isn't enough evidence of a crime and reject such charges.

Cunningham, a Vietnam veteran and former fighter pilot first elected to Congress in 1990, has said his real estate dealings with Wade showed "poor judgment" but has denied wrongdoing.

The Republican announced Thursday that he will not seek re-election in his North County district next year.

He said he couldn't do his job, defend himself from allegations of impropriety and run for office at the same time.

He sits on a subcommittee that oversees Pentagon spending and another committee overseeing intelligence agencies.

Cunningham said he'll sell his Rancho Santa Fe house and give a portion to charity.

Wade, who stepped down as head of his firm, MZM Inc., after the stories ran, had bought a 42-foot yacht and renamed it the Duke-Stir before Cunningham moved in part time. Cunningham said he paid $13,000 in docking fees and maintenance since moving aboard in April 2004.

That yacht was docked in the same spot as the Kelly C, a flat-bottom, 65-foot riverboat Cunningham bought in 1997 for $200,000 from another congressman and sold five years later for $600,000 to Thomas Kontogiannis.

Kontogiannis pleaded guilty in an unrelated kickback scheme involving a $6.3 million computer deal with New York public schools.

A company owned by his daughter and nephew provided $1.1 million in mortgages Cunningham used to buy his Rancho Santa Fe house last year. Kontogiannis said he later paid about half the debt on the house on Cunningham's behalf as part of the purchase of the Kelly C.

In 2002, his family's company also provided $150,000 in financing Cunningham used to buy a $350,000 condominium in Arlington, Va., according to property records.


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