Cunningham gets OK for legal defense fund North County Times - North San Diego and Southwest Riverside County News

By: MARK WALKER - Staff Writer

Supporters of U.S. Rep. Randy "Duke" Cunningham can now underwrite their belief in the embattled congressman by contributing to a legal defense fund.

The House of Representatives Committee on Standards of Official Conduct notified Cunningham's attorneys Thursday that it had granted his request to set up the fund to help pay mounting legal bills from an ongoing federal grand jury investigation.

The fund is separate from Cunningham's pending request before the Federal Election Commission that he be allowed to use money in a campaign account to pay a legal tab that his chief of staff, Harmony Allen, has said could easily reach $1.5 million.

Under House rules, legal defense funds are established as a trust and overseen by a trustee required to file quarterly reports with the Office of the House Clerk. Once established, corporations, labor unions and individuals can donate up to $5,000 per year.

"According to your letter, the Trust has become necessary because of legal expenses arising in connection with a grand jury investigation that concerns your official duties and bears on your reputation and fitness for office," read a letter to the 50th Congressional District representative signed by Committee Chairman Rep. Doc Hastings, R-Wash. "The Committee hereby approves the Trust."

Kenneth Batson, who has served as Cunningham's longtime campaign treasurer, will act as trustee of the fund, officially known as the Randall Cunningham Legal Expense Trust.

In addition to filing quarterly reports, any contribution of more than $305 in a 12-month period also must be reported by Cunningham in the annual financial disclosure statement required of every member of Congress.

K. Lee Blalack, the lead attorney representing Cunningham, said Thursday that Cunningham was happy with the ruling of the ethics committee.

"Duke appreciates the committee's prompt review of his request and is pleased by its decision," he said.

Cunningham joins House Majority Leader Tom DeLay, R-Texas, and a handful of other members of Congress who have defense funds. DeLay is battling ethics charges related to his dealings with a lobbyist.

Cunningham, R-Escondido, is being investigated by federal authorities over his dealings with two defense contractors, ADCS of Poway and MZM Inc. of Washington, D.C.

Both have been significant financial contributors to his past campaigns and both have benefitted from Defense Department contracts in recent years. Cunningham is a member of the House Appropriations Committee and its Defense Subcommittee.

MZM and ADCS officials have said they are cooperating with the investigation, an inquiry being led by the U.S. attorney's office in San Diego with field work being conducted by agents from the FBI, IRS and the Pentagon's Defense Criminal Investigative Service.

Last month, government prosecutors alleged in a civil suit related to the investigation that Cunningham had "demanded and received" a bribe from MZM founder Mitchell Wade.

They allege that when Wade purchased Cunningham's home in Del Mar Heights in late 2003 for $1.675 million, he paid well in excess of the true market value. Wade sold the home 11 months after purchasing it for $700,000 less than what he paid Cunningham and his wife, Nancy.

That transaction amounted to a financial gain for the 63-year-old Cunningham that violated bribery and corruption statutes, the government attorneys allege.

Wade, who also provided a boat that Cunningham lived aboard for more than a year while in Washington, has declined to comment.

Cunningham has denied any wrongdoing and said he expects to be exonerated. The probe led to the congressman's decision not to seek re-election.

The civil suit seeks to block the Cunninghams from taking the proceeds of their planned sale of an estate home they bought in Rancho Santa Fe in 2004 following the sale of the Del Mar Heights home. That property, purchased for $2.5 million, is for sale for $3.5 million.

Government attorneys and the Cunninghams are close to a deal that will allow the home sale to go forward with the money placed in an escrow account until resolution of the criminal investigation, a source close to the investigation said Thursday.

In June, Cunningham hired the Washington-based law firm O'Melveny & Myers. His legal team is headed by Blalack in Washington and by Mark Holscher, a former assistant U.S. attorney who works out of the firm's offices in Los Angeles.

Blalack, a former chief counsel to the U.S. Senate's Permanent Subcommittee on Investigations and a cable television news commentator, has refused to say what his firm is charging the congressman, whose district includes most of North County.

The granting of Cunningham's request for a legal defense fund was met with consternation in the Washington offices of the watchdog group Citizens for Responsibility and Ethics in Washington.

Melanie Sloan, the group's executive director, said that while she wasn't surprised at the development, she objects to defense funds on principle.

"But no member of the House or Senate would ever vote against them not knowing when they might need one themselves," Sloan said.

Cunningham also is seeking Federal Election Commission approval to use about $670,000 in his campaign account to pay his legal bills. The campaign stopped accepting any new contributions in mid-July when Cunningham announced he would leave Congress next year.

The commission, which is expected to rule on that request within the next three weeks, has generally allowed members of Congress facing legal troubles to use campaign funds to pay their lawyers. House members earn an annual salary of $162,500.

Sloan's group has opposed that request, arguing in a letter to the commission that because Cunningham has not been indicted, "it is unknown whether any of the eventual criminal charges filed against him will stem from campaign activity or his status as a federal officeholder. It seems unlikely, however that at least some of the potential charges will not involve such activity."