SAN DIEGO ---- U.S. Rep. Randy "Duke" Cunningham and his wife contend that the federal government violated their due process rights by moving to block the sale of their Rancho Santa Fe estate and are asking for monetary damages.
The couple also argue that the action to block and eventually move to seize the proceeds of a sale has resulted in "low-ball" offers far below the $3.5 million they are seeking for the property.
In July, the government attempted to block the sale by filing what was initially a secret notice of its interest in the property. U.S. attorneys contend that Cunningham, R-Escondido, bought the home in part with money obtained in violation of bribery statutes.
A federal grand jury seated in San Diego began investigating the 63-year-old lawmaker's dealings with a defense contractor, Mitchell Wade and the Washington-based company that Wade founded, MZM Inc., in June.
In pleadings filed Tuesday in the government's civil case seeking forfeiture of the home, Cunningham's attorneys argue that the government's action was a clear violation of federal law.
They contend U.S. attorneys in San Diego violated the law when they filed a lis pendens, a notice that the government had filed a civil suit against the property, and then sealed and never served the couple with notice of the suit.
As a result, the Cunninghams are asking a judge to "remedy the government's knowing violation of their due process right by awarding monetary damages as well reasonable attorneys' fees and costs," the attorneys state. The amount being sought was not specified.
The U.S. attorneys handling the case could not be reached for comment late Tuesday afternoon.
The grand jury probe and civil case they are in charge of stems from Wade's purchase in late 2003 of the Cunninghams' former residence in Del Mar Heights for $700,000 more than he would sell the property for 11 months later. MZM saw its government contracts soar around the time of the home sale.
When the U.S. attorney voluntarily unsealed the civil suit against the couple's Rancho Santa Fe home two weeks ago, the document revealed that federal prosecutors are alleging Cunningham "demanded and received" the inflated payment from Wade in violation of bribery laws.
Cunningham has denied any wrongdoing. Attorneys for Wade have consistently refused comment.
A second defense contractor, ADCS of Poway, was swept up in the criminal investigation last month when its offices were raided by federal agents. ADCS has denied any impropriety and says it is cooperating with the government.
The raid at ADCS was similar to the one that agents had conducted at Cunningham's home in July. At the same time Cunningham's home was being searched, agents in Washington, D.C., also were searching Wade's home, MZM's offices and a 42-foot boat owned by Wade, a boat that Cunningham had lived on for more than a year.
On July 14, Cunningham announced he would not seek re-election and that he and his wife would sell the Rancho Santa Fe home and donate a portion of the proceeds to three local charities.
The gated home was listed for $3.5 million last month, nearly $1 million more than the couple paid for it in 2004, a purchase made in part with the proceeds from the Del Mar Heights sale to Wade.
In their pleadings, Cunningham attorneys Mark Holscher, Kristina Hersey and K. Lee Blalack argue that because the government failed to serve the couple with notice of the intent to block the home sale, the civil case should be tossed out.
"By use of this unlawful ---- and, indeed, unprecedented ---- tactic, the government successfully restrained the sale of the Cunninghams' home" and left them with no chance to "contest those allegations on the merits," the attorneys argue.
The couple also want a judge to approve a plan that would allow them to sell the home. They ask the sale be allowed to proceed and that the net proceeds, minus an undisclosed outstanding balance on the deed of trust for the home, be held in escrow until the conclusion of the government's investigation.
Included in Tuesday's filing was a letter from an attorney for the company listing the Cunninghams' home. The letter states that the government's actions against the property have resulted in offers of about $2.5 million.
Peter Lewi, attorney for The Sterling Real Estate Co., writes: "These 'low-ball' expressions of interest are in my opinion clearly based on a perceived lower value of the property based on the existence of the lis pendens. Beyond the impact on price, the lis pendens is likely to preclude any transaction from coming together at any price."
The first court hearing in the civil forfeiture case is set for 1:30 p.m. Friday afternoon before U.S. District Court Judge Dana Sabraw in San Diego.
Contact staff writer Mark Walker at (760) 740-3529 or mlwalker@nctimes.com.
