The Duke and the Enterprise
Yesterday, Rep. Randy "Duke" Cunningham pled guilty to federal charges of bribery and tax evasion. What follows is an excerpt from the first chapter of JEFFREY ST. CLAIR’s new book Grand Theft Pentagon, available soon from Common Courage Press.
On the morning of July 1, 2005, FBI agents raided the palatial southern California home of the ultra-hawkish congressman Randy "Duke" Cunningham. With search warrants in hand, the feds rummaged through Cunningham’s $2.55 million mansion in the exclusive conclave of Rancho Santa Fe, outside San Diego, looking for evidence linking the 8-term Republican to Mitchell Wade, the founder and CEO of MZM, Incorporated, one of the Pentagon’s top 100 contractors.
At the same time the FBI was searching through Cunningham’s desk drawers, vaults and computers in California, other agents were executing a raid on the DC offices of MZM. Later that afternoon, FBI agents also rifled through a 42-foot yacht named the "Duke-Stir," docked on the Potomac River, where Cunningham resides, rent free, when he is in Washington.
The investigators were hunting for evidence that Cunningham, a former fighter pilot in Vietnam who claims to have been the inspiration for the Tom Cruise role in the movie "Top Gun," may have accepted bribes from Wade in exchange for helping MZM land a bevy of defense and intelligence contracts from the federal government.
The corruption probe was prompted by the disclosure that in 2003 Wade had purchased the congressman’s old four-bedroom house in San Diego for princely sum of $1.7 million. Wade soon put his new house on the red hot San Diego real estate market, where it sat unsold for almost a year. He finally unloaded it for $950,000.
During that same period of time, the average prices of houses sold in San Diego County climbed by more than 25 percent and rarely stayed on the market for more than a few weeks. Yet, Wade took a $750,000 bath on the Cunningham deal. The federal agents wanted to know why.
The Duke denied any wrongdoing and could offer no explanation for the mysterious and sudden nosedive in the value of his old house. "My whole life I’ve lived above board," Cunningham pleaded. "I’ve never even smoked a marijuana cigarette."
The Duke may not have treated his lungs with ganja, but he did attend one of the most infamous orgies in Pentagon history, the 1991 Tailhook Symposium in Las Vegas, the annual gathering of Navy flyers, Pentagon bigwigs, congressional kingpins and defense contractors. Over the course of that September weekend at the Vegas Hilton, at least 83 women were stripped, forced to run a gauntlet of drunken, groping pilots, and sexually molested, with some being forced to "ride the butt rodeo", a Tailhook euphemism for having a pilot bite your buttocks until you can shake yourself free. One investigator blamed the Tailhook scandal on the "Top Gun mentality" of the pilots and their superiors. Bring back some memories, Duke?
One female Navy commander later speculated that part of the vicious of the 1991 Tailhook orgy stemmed from the increasing hostility of the military and its backers to the increasing presence of women in positions which had traditionally been the exclusive domain of men. "This was the woman that was making you, you know, change your ways," she said. "This was the woman that was threatening your livelihood. This was the woman that wanted to take your spot in that combat aircraft."
For years after the event, Cunningham, though, referred to the "alleged misconduct" at Tailhook, claiming that the Navy flyboys were just engaging in a little benign steam-venting. He has also tried to block efforts by Congress to curb sexual harrassment in the military, rousing himself into passionate denunciations of such measures as "stinking of political correctness".
Cunningham claims that he had been trying to sell his San Diego house for some time. He said he told several people that his house was on the market and one day out of the blue he got a call from Wade, who, Cunningham claims, said, "Hey, I’ll buy it!" The Duke said that the price of the house was established by a local real estate agency.
The problem is that the records don’t exactly back up Cunningham’s miraculous tale of his sudden enrichment. The congressman’s house was sold without the aid of a realtor and it was never put on the Multiple Listings Service database of homes for sale. Moreover, Cunningham did not record his munificent windfall on his financial disclosure form, which every member of congress must file each year.
Duke Cunningham prefers to sleep not in the toney community of Potomac, Maryland, but on the Potomac River itself in a yacht. Perhaps Cunningham’s preference for the fetid swamps and mosquito-clotted banks of the Potomac stems from his nostalgia for Nixon and the president’s nightly sojourns from Great Falls to the Tidal Basin aboard the USS Sequoia.
In 1997, Cunningham purchased the 65-foot riverboat named the Kelly C from his pal Sonny Callahan, the former Republican congressman from Alabama, for $200,000. The flat-bottomed yacht, which is not deemed sea-worthy enough to venture out into the Chesapeake never mind the Atlantic, only occasionally puttered up and down the river where observers on the Georgetown tow-path could observe the former Navy aviator at the helm, dressed up, according to one longtime resident of M Street, like Admiral Halsey. Dockworkers at the Glen Cove Marina derided the Kelly C as merely a "big party barge."
In 2002, the Duke sold the Kelly C to a Long Island tycoon named Ted Kontogiannis for $600,000, snagging a cool $400,000 profit, even though the condition of the yacht had deteriorated to the point where the congressman himself had to pilot the boat to the shipyards of Consolidated Yachts to undergo a lengthy list of repairs. When the Duke dropped off the boat, he handed the owner of the shipyards an autographed glossy photo of himself adorned in his flight jacket.
For his part, Kontogiannis says the acquisition of the Kelly C was "a steal", although he has never taken the boat out of its slip and, in fact, never registered the sale of the boat with the Coast Guard, whose registry of ships still records the yacht as being owned by the congressman.
At the time, Kontogiannis bought the Kelly C, he was experience, what he calls, "a little problem." In fact, Kontogiannis had just been convicted on kickback and bribery charges involving his role in a bid-rigging scheme over contracts with the New York public school system and he was looking for a pardon from the Bush administration. Kontogiannis admits that he asked Duke Cunningham for help in finding a way to persuade Bush to expunge his conviction. According to Kontogiannis, the Duke put the convict into contact with a DC law firm and recommended the names of a couple of lawyers to press his case. Eventually, Kontogiannis said he declined to pursue the pardon because it involved "too much aggravation."
But the tycoon’s favors for the Duke didn’t end with the purchase of the congressman’s party barge. Kontogiannis’s daughter and nephew, who own a New York mortgage company, floated the congressman two loans totaling $1.1 million for the purchase of his Rancho Santa Fe mansion. Cunningham paid off one of the loans with the bloated proceeds from the sale of the Kelly C.
In the wake of the disposition of his riverboat, the Duke was not forced to seek cover in the Mitch Snyder Memorial Homeless Shelter. Instead, he made a pinpoint landing onto the deck of yet another yacht, named coincidentally or not, the Duke-Stir, and owned by his old pal, Mitchell Wade, CEO of MZN, Inc. Wade invited the congressman to live rent-free on the Duke-Stir. Since it’s a crime for members of congress to live rent free on someone else’s property, Cunningham has evaded this troublesome legality by paying $13,000 a year in dock fees, far below the going rent in the more habitable quadrants of the Washington metro area.
Wade and his company also helped to finance Cunningham’s political campaigns. According to records from the Center for Responsive Politics, MZM’s political action committee donated $17,000 to Cunningham’s coffers from 2000 through 2004. Wade personally twisted the arms of his employees to extract donations for Cunningham. "By the spring of ’02, Mitch was twisting employees’ arms to donate to his MZM PAC," one former MZM employee told the San Diego Union-Tribune. "We were called in and told basically either donate to the MZM PAC or we would be fired."
But what did Wade and his firm get in return for the largesse they’ve shown the Duke? MZM is one of those obscure enterprises started up by former Pentagon staffers and military officers to feed off the defense budget. Along with Wade, a former Pentagon staffer, all of the other corporate officers at MZM joined the company after successful careers in the military. MZM vice-president Joseph Romano was the former head of the Defense Intelligence Agency’s technological assessment group. Another MZM vice president, James C. King, is a former Lt. General from the Army, who once headed the National Imagery and Mapping Agency. Yet another vice president, Wayne Hall, is a retired Army general who commanded a military intelligence unit during the 1991 Gulf War. The lone exception is Sue Hogan, MZM’s vice president for governmental relations. In her former life, she served as a top staffer on the Senate Appropriation’s Committee’s subcommittee on defense spending.
Unlike many such revolving door operations, MZM struggled in its formative years, rarely pulling in more than $20 million in revenues in a single year. Then came 9/11, Bush’s wars, and the fruitful relationship with the Duke. In 2002, thanks to a flood of Pentagon and CIA contracts, MZM’s fortunes took a sudden turn for the better. By 2004, the small firm was hauling in more than $166 million in defense contracts a year.
What kind of contracts did the Duke help MZM obtain? The congressman took refuge behind a veil of secrecy. "They are very, very classified," Cunningham said.
The details of the MZM contracts remain obscure, but a review of the firm’s annual report shows that the work ranges from digital mapping, private intelligence operatives and interpreters to the production of psy-ops materials and "collections of foreign language vocal signals."
Cunningham discounts the allegation that he was doing any special favors for Wade or MZM. "The way it works here is: I support a lot of credible defense programs for the Air Force, Navy, ship building, ship repair or intelligence," Cunningham explained. " And they say, you know, ‘Duke, these are good programs. This is what I want you to do.’"
Wade had a somewhat more succinct and instructive view of the impact of his political dispensations . According to a former MZM employee, Wade explained that he focused his lobbying efforts on a handful of influential members of congress that he had bankrolled such as Cunningham: "The only people I want to work with are people I give checks to. I own them."
The remarkable aspect of the Cunningham affair is its essential banality. The casual dispensation of political graft is the rule in Washington and has been since the days of the robberbarons. This is especially true when it comes to politicians, such as Cunningham, who are in a position to protect and advance the interests of the Pentagon’s beefy portfolio of weapons contractors.
Cunningham was never considered a particularly adept politician. He was not a gifted orator like Robert Byrd. Not a slick operator like Trent Lott or Christopher Dodd. Not a master of the legislative parlor tricks in the mode of Pete Dominici or Ted Stevens. Indeed, Cunningham is a clumsy speaker burdened with a boorish personality. The Duke got by on implacable loyalty to his party and, more decisively, on blind obedience to his political patrons.
What political power he enjoyed came courtesy of the economic geography of his southern California district, which harbors a thicket of defense industry giants, from TRW and SAIC to Northrop Grumman and Titan, and military bases. Cunningham was a company man and DC is a new kind of company town. His guardianship of those weapons firms secured Cunningham a seat on the Defense Appropriations Subcommittee, one of the most powerful enclaves on the Hill. With that seat, Cunningham became a mini-potentate in Congress and dozens of defense contractors made the annual Haj to his office to lay riches at his feet and requests on his desk.
As such, the Duke’s travails serve as an edifying symbol for how completely Congress has been captured, from top to bottom and left to right, by the coterie munitions makers and weapons merchants that underwrite and direct the American political system. Some veterans of the Hill simply refer to incessant feeding of the Pentagon beast as "the Enterprise", the axiomatic function of their existence in Washington.
The Enterprise pivots on the annual disbursement of the $500 billion defense budget. In an era of shriveling federal spending on domestic social programs, the defense budget remains the most reliable pork barrel in town. Even the thawing of the Cold War and the death of the Soviet Union did little to inhibit the pace of Pentagon spending.
Indeed in July 2000, Admiral Jay Johnson pronounced, as he stepped down from his post as the Navy’s top officer, that national security requires a defense expenditure of 4 percent of the nation’s Gross Domestic Product. It became known as the 4 Per Cent Solution. A couple of weeks later, General James Jones, Commandant of the Marine Corps, told Defense Daily to call for a "gradual ramp up" in defense spending "to about 4 to 4.5 percent of the US gross domestic product." Two days after Jones’s comments, Gen. Gordon Sullivan, formerly Army Chief of Staff and now president of the 100,000-strong Association of the US Army, confirmed the Pentagon’s floor demand: "We must prepare for the future of the security of our nation. We should set the marker at 4 percent."
But what does 4 percent actually means in dollar terms? In 2002, the Office of Management and Budget projected GDP at $10.9 trillion rising to $13.9 trillion in 2007. Thus a military budget set at 4 percent of GDP in 2002 would amount to $438 billion, and in 2007 $558 billion. The combined spending of all putative foes of the United States-Russia, China and our old friends the rogue states, including Iran, Syria, Iraq, Libya, North Korea, Serbia, Cuba and Sudan-amounts to a little over $100 billion.
It is not well understood that though the number of ships, planes and troops available to guard the nation has declined sharply, the actual flow of dollars into the pockets of the Praetorians and their commercial partners has remained at cold war levels. It is true that in the immediate aftermath of the cold war, US military spending under George Bush I diminished slightly. Clinton reversed this trend with enough brio to allow Al Gore, speaking to the Veterans of Foreign Wars in the 1996 campaign, to declare that the Democratic bid to the Praetorians that year was far superior to that of the Republicans.
The spending spree hasn’t abated since. But all that money did nothing to prevent the attacks of 9/11, in part because the prime arteries of that federal largesse where still pumping billions into the big ticket items of the Cold War arsenal such as Star Wars, Stealth bombers and fighters and Navy battle groups. After 9/11, these perverse spending habits simply got worse. All the old projects, designed to fight an enemy that no longer existed and useless against those who nearly destroyed the Pentagon itself, got funded almost without a question being asked.
During the peak of the Cold War and the Reagan arms build up, the annual Pentagon budget topped out at $453 billion (in 2004 dollars). In 2004, the Defense budget soared to over $500 billion–$47 billion more than the hey day of the Reagnites.
The peculiar consequence of the budgetary and appropriations process meant that there was not a dime to spare from the annual budget to fund the Afghanistan and Iraq wars. Those invasions, which may end up costing more than $850 billion, had to be financed off the books, through special appropriations, with little public debate and a wink-and-a-nod from the leadership of both parties. There is a calculated opacity to the war and defense appropriations process that is designed to frustrate outsiders.
That’s because much of the real defense spending on the Hill happens after hours and is planted in the bewildering copse of congressional earmarks, obscure line items conference committee ad-ons and last minute riders that most members of congress don’t even know how to interpret. And these covert addons have spiked since 9/11, rising from $4 billion a year in 2001 to $12 billion a year in 2005.
Unlike most agencies, the Pentagon is not bound by its budget. The more it spends, the more it gets. For example, the Pentagon told congress that the Iraq war would cost about $1.5 billion a month. It ended up costing between $5 and $8 billion a month, with no end in sight. The Pentagon has an apt catch-phrase for this bloody flood of spending. It’s accountants call it the "burn rate."
The members of the Senate and House Armed Services and Defense Appropriations committees act as a kind of elite Praetorian Guard overseeing the interests of the Pentagon and his cadre of contractors. The prime prerequiste for induction into this legislative tribunal is a finely-tuned solicitousness to the desires of the weapons industry. And the faithful are richly recompensed for their labors.
Let’s begin with Cunningham’s political haul. The eight-term congressman has faced negligible opposition in a district that has been delicately gerrymandered to ensure the continuity of Republican stewardship. Even so, each year Cunningham amassed a staggering tranche of campaign slush without hardly breaking a sweat and the overwhelming amount of that loot originates with weapons and aerospace companies.
In the 2004 congressional election, Cunningham’s opponent raised less than $100.000. By contrast, Cunningham heaped up $771,822 and had another $200,000 in reverse that had gone unspent from his previous campaign. His top PAC contributors were all Pentagon contractors, lead by Lockheed and Titan who chipped in $15,000 each, MZM with $12,000, General Dynamics contributed $11,000, while General Atomics, Northrop-Grumman and SAIC each pitched in $10,000.
Those corporate contributions are the financial unguents that lubricate the political machinery of the Hill. Between 1997 and 2004, the twenty largest Pentagon contractors lavished Washington’s political elites with $33.6 million in campaign contributions. But this is just the icing on a very rich cake. Over the same period, those same companies invested $390 million in lobbying congress. The investment paid off handsomely, yielding those very weapons companies $558.8 billion in federal contracts.
It’s fine to live on the dole of a defense company; just don’t press the point by reposing for free on their yacht. That’s the kind of exposure that might spoil the game for everyone. The profligacy of an individual member of congress must not be permitted to interfere with the grander profligacy of the munitions makers. In the end, the Duke was told that he should fall on his sword, like a true Praetorian, to protect the business of the Empire. In mid-July the congressman suddenly announced his retirement, saying he had decided to "conclude the public chapter of my life" and not seek re-election to a ninth term.
What Cunningham in his obduracy never realized was that he was just an interchangeable part, a legislative errand boy, fetching home pails of contracts every fall when the appropriations bills come due. No special talent required. Almost anyone could do it. In the end, the congressman was expendable, so that the Enterprise might endure forever. The Pentagon and its contractors and numberless parasites have many available to shoulder the Duke’s duties.
JEFFREY ST. CLAIR is the author of Grand Theft Pentagon: Tales of Corruption and Profiteering in the War on Terror.