SignOnSanDiego.com > News > Metro -- Agents raid second firm with ties to Cunningham

Data sought on ADCS' government contracts
By Dean Calbreath and Onell R. Soto
August 17, 2005

Federal agents seized documents yesterday from the Poway headquarters of a defense contractor with close ties to Rep. Randy "Duke" Cunningham and raided the home of the company's president.

Agents from the FBI, Internal Revenue Service and Department of Defense were seeking documents and computer records pertaining to government contracts secured by ADCS Inc., said sources familiar with the investigation.

In particular, the agents were looking for documents relating to contracts that involved the House Appropriations subcommittee on which Cunningham sits, the sources said.

Company President Brent Wilkes and other ADCS officials, who have refused to speak to the media for the past two months, could not be reached for comment. A recording on the company's switchboard said the office was closed for the day.

Wilkes was vacationing in Hawaii as federal agents raided his Poway home. He did not respond to a call to the Royal Hawaiian Hotel in Honolulu.

The raid comes seven weeks after a similar raid on MZM Inc., a company founded by Mitchell Wade, who formerly worked for ADCS in the Washington, D.C., area.

Controversy surrounding Wade's purchase of Cunningham's Del Mar home for a price far above market value – at a time when MZM depended on congressional support for its multimillion-dollar defense contracts – led Cunningham to announce last month that he would not seek re-election.

Federal agents entered the ADCS headquarters before 7:30 a.m. yesterday and barred the company's 50 or so employees from entering, said one source familiar with the company. The agents told employees that they were especially interested in the company's accounting and purchasing records, the source said.

The sources spoke on condition of anonymity.

Reporters who went to the building later in the day also were turned away. Federal agents patrolling the grounds displayed their guns and asked onlookers to stay back. Through the large windows of the steel-and-glass building, dark-suited agents could be seen carrying large file boxes. Late in the afternoon, federal agents were still carrying empty cartons into the building.

Like MZM, ADCS won millions of dollars of government contracts while making significant donations to Cunningham, a Rancho Santa Fe Republican, and other members of the Subcommittee on Defense. The subcommittee repeatedly penciled in funding for projects involving the company, even though the Pentagon had not requested the money.

Since 1997, Wilkes and other ADCS insiders contributed more than $600,000 to political campaigns, mostly targeting members of the Appropriations and Armed Services committees. Cunningham and his American Prosperity political action committee received $53,500 of those donations.

As reported Aug. 5 in The San Diego Union-Tribune, Cunningham also repeatedly used ADCS' corporate jet on campaign-related trips, including a hunting trip in Idaho and a golf tournament in Hawaii. House Majority Leader Tom DeLay also flew on the jet.

The Inspector General's Office of the Defense Department has been investigating ADCS' military contracts for at least two weeks. Yesterday's raid included agents of the Defense Criminal Investigative Service.

Federal investigators have been looking at Cunningham and local defense contractors since June, when the Union-Tribune reported that Wade bought Cunningham's Del Mar-area home and then sold it several months later for $975,000, taking a $700,000 loss.

In recent days, federal authorities subpoenaed documents from Wade as part of a San Diego grand jury investigation into Cunningham's ties to defense contractors, sources close to the investigation have said.

Wade has not been subpoenaed to testify before the grand jury, said his lawyer Charles La Bella.

La Bella and John Kirby, another attorney representing Wade, said they would comply with the subpoena but declined to say what documents the government requested.

On July 1, federal agents raided Wade's offices in Washington, D.C., and Cunningham's house as well as a yacht named the Duke-Stir, which was owned by Wade but was used as a residence by Cunningham during his stays in Washington.

Prosecutors often subpoena records in addition to conducting searches to ensure that they receive everything they're seeking.

Cunningham, who serves on the House panel that oversees Pentagon spending, has said he helped promote MZM's business the same way he has helped other defense contractors, but has denied wrongdoing.

Grand jury subpoenas also have gone out to members of Cunningham's Washington staff, sources close to the investigation said. But announcements of who has been summoned to San Diego are unlikely until after Labor Day.

Members of Congress and their staffs are required to announce grand jury subpoenas on the House floor.

The House is on its summer recess, and members are not scheduled to return to Washington until Sept. 6, said Cunningham spokesman Mark Olson. "Obviously the house is not in session, so there is no way to read it on the House floor," he said yesterday.

Olson declined to confirm the subpoenas. "I can't acknowledge anything involving the subpoenas to any of the staff members, including myself," he said.

ADCS, or Automated Document Conversion Systems, specializes in scanning documents so they can easily be indexed and cross-referenced. Its biggest project has been archiving 1.2 million architectural documents from the Panama Canal in 1999.

From 1994 to 2001, the House Appropriations Committee repeatedly added funding for ADCS to the Pentagon budget, even though the Pentagon did not ask for the money. Occasionally, the committee criticized the Pentagon for not asking for the funding.

From the moment ADCS' work for the Pentagon began, critics charged that Cunningham had unfairly helped the company. When a reporter from Copley News Service asked Cunningham about it in 1997, he told her that anyone who questioned his support for the company could "go to hell."