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US: Fewer Auditors, Pentagon Secrecy Hinder Oversight

Could a defense company stuff a Pentagon contract with enough overhead to hide bribes to a congressman? Easy enough, say veteran Washington insiders.

by David WoodNewhouse News Service
November 30th, 2005

WASHINGTON Could a defense company stuff a Pentagon contract with enough overhead to hide bribes to a congressman?

Easy enough, say veteran Washington insiders. The Pentagon has tens of thousands of contracts to monitor and a shrinking force of auditors, making oversight difficult. What's more, the super-secret part of the defense budget the classified, or "black" budget hides some $28 billion in spending. Government auditors and even senators have to get special clearance to see the details.

That is how Rep. Randy "Duke" Cunningham gained at least $2.4 million in favors from companies that held contracts with the Defense Department. The companies were not identified by name in the plea agreement reached with the California Republican and filed Monday in U.S. District Court in San Diego.

It was clear from facts in the criminal charges, however, that Mitchell J. Wade, president of Washington-based MZM Inc., is "Co-conspirator No. 2." On Tuesday, Michael Lipman, a lawyer for Brent Wilkes, head of San Diego area defense contractor ADCS Inc., said Wilkes is "Co-conspirator No. 1" in the charging documents.

Cunningham, decorated for service as a Navy pilot during the Vietnam War, sat on the defense subcommittee of the House Appropriations Committee, where he shaped billions of dollars in defense spending. He resigned his seat Monday.

It wasn't defense auditors who caught Cunningham; it was investigators looking into his ownership of a luxury home, a yacht and other perks.

Wade's relationship with Cunningham became the early focus of the investigation when San Diego area newspapers reported in June that he had bought the congressman's Del Mar, Calif., home at an inflated price and allowed him to live rent-free on his 42-foot yacht, the Duke-Stir, while in Washington.

The first payments to Cunningham listed in the plea agreement were checks totaling $100,000 from Wilkes that were issued around May 1, 2000. About that time, Wilkes' company was the subject of a Pentagon inspector general's report because of complaints "alleging favoritism and inappropriate actions."

The federal charging document said Cunningham used his position to get funding for programs for the two defense contractors and then pressured Pentagon officials to award them the contracts.

ADCS has received $80 million in Pentagon contracts since 1999, mostly for converting documents into digital format using proprietary software. It was not until late 2003 that Wade's company, MZM Inc., began receiving Pentagon contracts that eventually totaled more than $160 million, mainly for staffing intelligence agencies.

Members of influential congressional committees "have a lot of power and opportunity and are sitting in a place where a lot of money flows," said Gordon Adams, director of security studies at George Washington University and a former White House budget director for national security.

In that environment, corruption goes undetected. "You're never going to catch it every time," Adams said.

That is particularly true of the dozens of programs embedded in the Pentagon's "black budget" accounts hidden in the hundreds of pages of fine print that details defense appropriations legislation. Some of these accounts are labeled "classified activity." Others are identified only by code names.

Because of the required special clearances, the Pentagon and Congress "typically exercise less oversight" on these programs than ones detailed in the open, said Steven M. Kosiak of the Center for Strategic and Budgetary Assessments, a Washington think tank.

Kosiak estimates the size of the "black budget" at $28 billion, including $14.2 billion in purchases of hardware or services and $13.7 billion in classified research and development.

Both the House and Senate Appropriations Committees have staffers cleared "to at least top secret," said John Scofield, a spokesman for the House panel.

But Steven Aftergood, an expert on government secrecy at the Federation of American Scientists, a nonprofit research group in Washington, said the volume of classified budget material has increased while the number of people cleared to see it has not.

Pentagon contracts are supposed to be thoroughly checked by the 3,508 auditors of the Defense Contract Audit Agency, a work force that has shrunk by some 2,000 auditors over the past five years. Information on Cunningham's alleged conspirators and their companies was reported by The Washington Post.

Rep. Cunningham's money trail


Some of the payments accepted by Rep. Randy "Duke" Cunningham as detailed in his plea agreement:

$200,000 toward the purchase of his Arlington, Va., condominium.

$140,000 to a third party for the "Duke-Stir" yacht, which was moved to his boat slip for his use.

$16,867.13 to a marine services company for repairs to his own yacht, the "Kelly C."

$12,000 paid to an antique store for three night stands, a leaded glass cabinet, a washstand, a buffet and four armoires.

$6,632 paid to a furniture store for a leather sofa and a sleigh-style bed.

$7,200 paid to an antique store for a circa 1850 Louis Phillipe period commode and a circa 1830 Restoration period commode.

$13,500 toward the purchase of a Rolls-Royce.

$17,890 for repairs to the Rolls-Royce.

$11,394 paid to a moving company to ship his belongings from his Arlington condominium to his San Diego-area home.

$2,081 paid to a Washington, D.C., hotel for his daughter's graduation party.

$9,200 paid to a manufacturer for two Laser Shot shooting simulators.

$10,000 paid to various hotels, resorts and restaurants for his meals and entertainment expenses.

Hundreds of thousands of dollars in cash to him and a company he controlled.

Source: Plea agreement filed in U.S. District Court

The Associated Press

 





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