Defense contractor's work examined in 1999 audit North County Times - North San Diego and Southwest Riverside County News

By: MARK WALKER and WILLIAM FINN BENNETT - Staff Writers

NORTH COUNTY ---- The work done by ADCS Inc., the Poway company raided by federal agents Tuesday, was the subject of a 1999 audit prompted by complaints that two unidentified congressmen had pressured the Defense Department to steer work its way, federal records show.

The audit, conducted by the Department of Defense Inspector General's office, examined how contracts were awarded and funding was allocated for a multimillion dollar program to convert paper documents to a computerized format, work that ADCS performs.

The company reopened Wednesday after shutting down when several agents from the FBI, IRS and the U.S. Defense Department Criminal Investigative Service arrived Tuesday morning with a warrant to search the company's records. Agents also searched the Poway home of the company's owner, Brent Wilkes.


ADCS, which received nearly $76 million in Defense Department contracts between 2000 and 2004, has been a frequent campaign contributor to U.S. Rep. Randy "Duke" Cunningham, R-Escondido, who is the subject of a San Diego federal grand jury investigation.

ADCS officials declined comment on Wednesday. Wilkes, who also is a member of the Del Mar Fair Board, did not return telephone calls.

A law firm representing the company issued a written statement late Wednesday afternoon that said the company was cooperating and that it was not immediately clear what the government was after.

"ADCS strongly believes that all of its actions have been proper and appropriate," the statement from the San Diego firm Coughlan, Semmer & Lippman read. "ADCS is confident the government will come to the same conclusion."

Tuesday's search of the firm by federal authorities is the second major search by federal agents since the grand jury began its investigation in June. The panel took up the case following a report that Cunningham sold his Del Mar Heights home to another defense contractor, Mitchell J. Wade, for $700,000 more than Wade would sell the property for less than a year later.

On July 1, the same federal agencies involved in Tuesday's action conducted unannounced searches at Cunningham's home in Rancho Santa Fe and at Wade's home in Washington, D.C. They also searched the offices of MZM Inc., the company owned by Wade, and his 42-foot boat, the Duke-Stir, that Cunningham has said he stayed aboard for more than a year starting in April 2004, while in Washington.

Gary Comerford, a spokesman for the Department of Defense Criminal Investigative Service in Arlington, Va., refused to talk about the investigation but hinted that Tuesday's actions wouldn't be the last.

"We won't discuss anything to do with an investigation," Comerford said, later adding, "We have a lot of work to do out there."

According to the 1999 audit report, three companies received a combined $9.73 million for contracts that had not been authorized by a federal team formed to prioritize spending on such projects. News reports from 1999 show that ADCS received a $3.9 million federal contract to create a digital stockpile of documents relating to the Panama Canal.

The funding came after two members of Congress and a Defense Department acquisition officer intervened, according to the report.

"The Assistant Deputy Under Secretary requested the audit because of several queries from concerned contractors alleging favoritism and other inappropriate behavior," the report states.

The Inspector General's office said Wednesday it could not provide the names of the congressmen the report referenced. It also could not name the companies that complained about the alleged favoritism.

The Washington attorney Cunningham has hired, K. Lee Blalack, said late Wednesday the congressman is proud of his association with ADCS.

"Duke cannot comment on the government investigation but he considers Mr. Wilkes a personal friend," Blalack said. "He has been proud to support the work of ADCS and other local companies that help defend our great country. It doesn't take an FBI raid to figure out that Duke has long supported the defense industry that employs thousands of his constituents."

While ADCS is not specifically named in the audit report, the work performed by the company, conversion of Panama Canal architectural documents to a computerized format, is mentioned.

Prior to the report being published, the Inspector General's office made several suggestions intended to increase competitiveness in the awarding of contracts. Because the auditors received promises changes would be made, they decided not to make formal recommendations, the report states.

Blalack said he has not seen the audit report but that if Cunningham was one of the lawmakers who interceded it should not come as much of a surprise.

"There is nothing inappropriate nor unusual about a member of Congress calling the Pentagon on behalf of a constituent regarding the use of appropriated funds," he said.

Cunningham, who has denied any wrongdoing and has said he welcomes the federal probe, will be in the spotlight again today. A North County group closely affiliated with the Democratic Party and representatives of a Washington watchdog group are scheduled to conduct a news conference outside his Escondido district office calling for his immediate resignation.

The group, North County Unity Coalition, says it will deliver about 1,000 signatures it has collected in the last two week calling for his resignation.

In July, Cunningham announced he would not seek re-election and that he and his wife planned to sell the Rancho Santa Fe home they purchased after they sold their Del Mar Heights residence.

Cunningham is home while Congress takes its annual August recess but has not made any announced public appearances and none are planned, Olson said.