Defense Contractor Sold to N.Y. Firm

MZM Owner Tied to Grand Jury Probe

By Charles R. Babcock
Washington Post Staff Writer
Thursday, August 18, 2005; D01



Veritas Capital, a New York private equity firm, announced yesterday that it will buy MZM Inc., a District-based defense contractor whose business has been in turmoil since its founder's financial dealings with a congressman triggered a grand jury investigation in June.

The purchase price was not disclosed, and it could not be learned how much Mitchell J. Wade, who started MZM in 1992 and owned the vast majority of the private company's stock, will receive. Veritas said in a written statement that the agreement includes existing contracts and other selected assets of MZM but "only specific liabilities associated with the ongoing operations of those assets."

Wade stepped down as head of the company in June after news reports that he did financial favors for Rep. Randy "Duke" Cunningham (R-Calif.) while the lawmaker pushed funding in Congress for programs on classified military intelligence programs on which MZM worked.

Wade bought Cunningham's home near San Diego in late 2003 and resold it several months later at a $700,000 loss.

He also let the congressman live rent-free on his 42-foot yacht, the Duke-Stir, which was docked on the Potomac River. FBI and other federal agents raided MZM's office, Wade's home and boat, and Cunningham's home July 1.

Cunningham has denied any wrongdoing. He announced last month that he will not run for reelection next year.

Yesterday's announcement said Veritas will make the acquisition through a newly created subsidiary, Athena Innovative Solutions Inc. It noted that MZM has 420 employees, 85 percent of whom have top-secret security clearances.

MZM employs many former military intelligence officials and some former FBI and CIA officers. It does counterintelligence work for the Pentagon and other intelligence work for an Army intelligence center in Charlottesville and a special operations command in Tampa, Fla.

The company won its first prime contracts from the federal government in late 2002 and has had more than $160 million in orders from defense agencies since then. The Pentagon cut off new work for the firm through its most lucrative contract in June because a draft inspector-general report found that it had not been competitively awarded under current rules.

Robert Rubin of Aronson Capital Partners of Rockville, who follows defense acquisitions, said, "Veritas is making a major play in homeland security." Bringing aboard so many people with top-level clearances "is clearly a plus," he said, adding that it makes sense to rename the company because of "the cloud" over MZM from the investigation.

Veritas last year bought portions of DynCorp, which has a major presence in the Washington area.

Robert B. McKeon, president of Veritas Capital, said in a statement that the new company, Athena, "is a leading intelligence services company providing unique intelligence capabilities and highly qualified people to numerous government agencies. . . . Our goal is to build on this exceptional talent base to continue to grow the company through new program wins as well as acquisitions."

Veritas said the acquisition is expected to close in September.

James C. King, a retired three-star general who replaced Wade as MZM's chief executive, was described in the announcement as the chief executive of Athena.

He said in a written statement that the new company is "particularly enthusiastic" about working with Veritas's advisory council. He cited Richard L. Armitage, the former deputy secretary of state, and several generals and admirals, including Barry R. McCaffery, who commanded U.S. ground troops in the 1991 Persian Gulf War, and Anthony C. Zinni, former commander in chief of U.S. Central Command.

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