Capitol Crooks
It started with the bribery indictment of California Rep. Randall "Duke" Cunningham, but before it's over, a sprawling investigation into a Pentagon contractor called MZM could snare some of Washington's most powerful inside players
A two-month U.S. News investigation, based on a review of hundreds of pages of court documents, private internal MZM records, and detailed interviews with a dozen key officials, shows how Wade used his connections on Capitol Hill and inside the Pentagon to gather inside information and turn his company into a moneymaking juggernaut. Melkessetian and other key MZM executives provided the magazine significant new details of Wade's influence-peddling operation. The magazine's review also revealed fundamental flaws in the government's national-security contracting procedures and showed how Wade risked compromising sensitive government secrets.
The inquiry's principal findings:
ÃÂÃÂÃÂ Despite having access to some of the nation's most sensitive secrets, Wade refused to submit paperwork for a background check to update his top-secret security clearance and had not undergone a background investigation since 1996, MZM sources say. Such background checks, required by law every five years, include financial reviews. Pentagon investigators knew that Wade's clearance had lapsed but did nothing about it, according to two former MZM officials. Wade continued to win classified government projects for a decade, during which time he had no active security clearance.
ÃÂÃÂÃÂ Wade made it appear that his employees were working for federal agencies in order to obtain their security clearances and used his connections to expedite them, MZM sources say. He urged employees not to disclose trips abroad, as required by law, and failed to disclose personal assets in Panama, another legal infraction.
ÃÂÃÂÃÂ Wade had a highly classified Pentagon budget document lying on his desk. Prosecutors say Wade's extraordinary access gave him "insight" into the Defense Department's "bargaining position" and allowed MZM to "squeeze top dollar" out of a key proposal.
ÃÂÃÂÃÂ Wade's close ties to former senior officials of a Pentagon agency, the Counterintelligence Field Activity, or CIFA, which helps identify and thwart terrorists and spies, are also being examined. So is his relationship with a defense contractor called Gray Hawk Systems Inc. Gray Hawk obtained several lucrative and questionable contracts from CIFA, which it then shared with MZM. Three senior CIFA officials with influence over the contracting process left the agency and joined Gray Hawk. The company's owner, Harry "Pete" Howton, sold it last year for $100 million cash and has since created a new company, Kingfisher Systems Inc.
Through Gray Hawk, Wade won tens of millions of dollars in subcontracts on CIFA work. Investigators believe Wade sought out insiders at CIFA for tips on upcoming agency projects, which he then used to craft earmarks for Cunningham, who allegedly inserted them into appropriations bills and then pressured Pentagon officials to award the contracts to Gray Hawk and MZM. Howton, the former CEO of Gray Hawk and current CEO of Kingfisher, did not return phone calls seeking comment.
Wade's security violations are extraordinarily serious, given CIFA's sensitive mission and the fact that officials from foreign countries came to MZM to do business. "You are throwing chum out there to attract the sharks, who are going to prey on what you are doing," says the former head of the Justice Department's counterespionage section, John Martin. "And you are inviting penetrations of your company."
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