Doubt now raised over whether Cunningham campaign account can pay legal costs

By: MARK WALKER - Staff Writer / NC Times

U.S. Rep. Randy "Duke" Cunningham had more than $700,000 in campaign funds at the end of June, money that a Federal Election Commission spokesman said Monday might not be available for legal fees as he battles ethics and possible criminal charges.

Federal law isn't explicit, but generally allows congressional representatives to use campaign funds to pay for legal fees that arise out of their work as lawmakers. Last month, an election commission spokesman said the Republican lawmaker now serving in his eighth term could use those funds for his legal fees.

But a different commission spokesman at the agency's Washington headquarters said Monday that Cunningham's attorneys may need to get approval before doing so.


"He can ask for an advisory opinion, or his attorneys can interpret the regulations to mean he can spend the money that way," commission spokesman Ian Stirton said. "If the commission thought that was a problem, it could open up an enforcement matter and rule how it sees fit."

Stirton said that former Ohio Democrat James Trafficant, who was thrown out of Congress and jailed in 2002 following bribery, racketeering and tax evasion convictions, was blocked by the commission from using his campaign account for legal fees.

The latest financial data reported by the Federal Election Commission on Monday show the Republican lawmaker had $672,114 in cash on hand in his Friends of Duke Cunningham campaign committee.

Cunningham also had more than $33,000 in cash at the end of May in a political action committee he formed and controls called American Prosperity. Updated reports for that committee's finances were not available.

The Rancho Santa Fe resident announced last week that because of an ongoing federal grand jury investigation into his dealings with a defense contractor he will not seek re-election after his current term.

His attorneys have told him the grand jury probe will probably take months, Cunningham said last week, adding that conducting a re-election campaign at the same time would be difficult if not impossible.

Cunningham has hired the Washington law firm O'Melvany & Myers to represent him. His lead attorney with that firm, K. Lee Blalack, declined comment on Monday. The firm has at least two attorneys working for Cunningham and Blalack has previously said a "team" of unspecified size is handling the case.

Cunningham also has the option of forming a legal defense fund to which people can contribute, similar to what House Majority Leader Tom DeLay has done to fight ethics allegations against him. Cunningham has not filed the paperwork necessary to create such a fund.

That would leave Cunningham with only two options for paying for his defense ---- his own money or the campaign funds. A source close to the investigation said Cunningham has thus far not used any of the campaign money for his legal fees, which the source added would likely run at least several hundred thousand dollars.

Ken Batson, treasurer for Friends of Duke Cunningham, said Monday that he has no idea how the campaign funds will be spent in the future. The campaign is no longer actively soliciting donations, Batson said, referring further questions to the congressman's office in Washington.

Cunningham spokesman Mark Olson said Monday that he doesn't know what his embattled boss's plans are for paying his legal bills.

The one thing Cunningham clearly cannot do is use the campaign funds for personal use, Stirton said.

"He can use it for legal expenses if that is deemed appropriate or he can save it to run for another office," he said. "He also could donate it to other campaigns or return it to contributors."

Friends of Duke Cunningham raised $133,309 between April 1 and June 30 and spent $63,401, according to its filings with the election commission. It is uncertain how many contributions were actually made after an initial June 12 newspaper report that led to the grand jury investigation.

That report told of Cunningham's sale of his home in Del Mar Heights to defense contractor Mitchell J. Wade, owner and former president of MZM Inc. Wade paid the congressman $700,000 more for the home than what he turned around and sold it for 11 months later, putting it on the market less than three months after purchasing it from Cunningham.

Around the same time, MZM reported on its Web site that its number of Pentagon defense contracts rose dramatically and that it had tripled its revenue from the Defense Department. Cunningham sits on the House Appropriations Defense Subcommittee.

Two days after the June 12 story, the North County Times reported that Wade also owned a boat, the "Duke-Stir," that Cunningham had been living aboard when in Washington starting in April 2004.

The congressman later said he paid more than $13,000 in dock and maintenance fees for the living arrangement.

Contact staff writer Mark Walker at (760) 740-3529 or mlwalker@nctimes.com.