When defense contractor Mitchell Wade’s corrupt relationship with Randy “Duke” Cunningham was exposed in 2005, Robert McKeon saw opportunity.

McKeon heads Veritas Capital, a New York private equity firm that buys defense contractors, and Wade’s company MZM Inc. looked like a good candidate for acquisition. The company was in distress, but it also had potentially lucrative intelligence contracts and more than 300 employees with Top Secret and above security clearances.

In September 2005, Veritas bought MZM for a “full price” of around $20 million, according to BusinessWeek. The deal was swiftly approved. “Veritas is profiting from the spoils of congressional bribes,” Keith Ashdown of Taxpayers for Common Sense complained, to no avail.

So how has Veritas done on its investment? Quite well.

By getting rid of Wade and keeping 94 percent of his old firm’s contracts, Veritas unlocked MZM’s revenue stream. In its first fiscal year of operation under new management, the company — renamed Athena Innovative Solutions — posted more than $100 million in sales.Athena also boosted the size of the workforce and acquired three small Virginia companies, including Business Defense and Security Corp.

In September 2007, two years after acquiring MZM, Veritas sold Wade’s old company for $200 million to CACI Inc. For those keeping score at home, that’s an annualized return of 900 percent. 

(Update: Veritas also employs former Gen. Barry McCaffrey, which has gotten them in some trouble.)

As I first revealed here last week, defense contractor Mitchell Wade aided the government in its investigation “of at least five other members of Congress” who were the subject of government investigations into whether they had engaged in “corruption similar to that of Mr. Cunningham,” according to a defense sentencing memo.

Wade is to be sentenced next month for providing former Rep. Randy “Duke” Cunningham with $1.8 million in bribes. He’s asking for a year of home detention in return for the extraordinary cooperation that he provided the government in its investigations of Cunningham and other current and former members of Congress (none of whom has been charged with a crime). They include:

• Sen. Dan Inouye, D-Hi.
• Rep. Alan B. Mollohan,  D-W. Va
• Rep. Jerry Lewis, R-Calif.
• Rep. Virgil Goode, R-Va.
• Rep. Katherine Harris, R-Fla.

The Inouye and Lewis connections involve Wade’s former employer, defense contractor Brent Wilkes, who introduced Wade to Cunningham.

During his trial, Wilkes testified that it was a “total misrepresentation” to say he relied on the Congressman Cunningham to do everything for him; Jerry Lewis, along with Rep. John Porter of Ill., were far more important, Wilkes said. (There’s excellent background on Lewis’ lobbying operation here.) The U.S. Attorney’s office in Los Angeles reportedly opened an investigation into Lewis back in 2006.

By contrast, Inouye, the Senate’s third-most senior Democrat, hasn’t yet been linked to an investigation of “corruption similar to Mr. Cunningham.” Wilkes was seeking the veteran Senate  appropriator’s help in lining up military and government contracts for his Honolulu document conversion subsidiary, Akamai Info Tech. Inouye was also one of more than a dozen members of Congress Wilkes unsuccessfully attempted to subpoena for his trial last year.

Mollohan’s ties to Wade are more direct. He received $23,000 in campaign contributions and gifts to a family foundation from Wade’s company, MZM Inc., and another firm that did business with MZM. In October 2002, MZM gave $20,000 to Mollohan’s Summit PAC. As Roll Call reported:

One of those who created Summit PAC for Mollohan was Robert Hytner, vice chairman of Information Manufacturing Corp. of Rocket Center, W.Va. — a company that had a close but apparently troubled business relationship with MZM.

In 2002, IMC paired with MZM on what was to be the initial round of a $12 million Defense Department contract. The contract was issued for support work for the Pentagon’s Joint Counter-Intelligence Assessment Group, Congressional sources said. Mollohan, who serves as ranking member on the Appropriations subcommittee on Science, State, Justice, Commerce and related agencies, said he had no role in securing any funding for that program.

How IMC and MZM came to share the $12 million DOD contract is unclear. IMC was to open a 70-person intelligence operation in West Virginia, and MZM would have filled 30 of those slots. Sen. Robert Byrd (D-W.Va.) issued a press release in October 2002 in which Wade thanked Byrd for helping secure the funds for the program.

But at some point in early 2003, IMC lost control of the contract to MZM, which took it over and then failed to open a West Virginia branch, according to a source familiar with the incident. Inquiries were made with the Pentagon by members of the West Virginia delegation about why Defense awarded the entire program to MZM. But since the work was classified, the Defense Department offered little insight into what happened, the source said.

The Defense contract eventually grew to be worth roughly $50 million over four years, all of which went to MZM, added the source.

Wade’s ties to Goode and Harris are old news. As I said last week, Wade wanted to open facilities in their districts and made $78,000 in “straw” contributions  to grease the wheels. To settle the charges, Wade agreed to pay  a $1 million civil fine to the Federal Elections Commission, the second-largest penalty in the commission’s history.

As I said earlier, neither Harris nor Goode nor any of the other three on this list has been charged with wrongdoing. Even so, I still love this letter that Harris wrote to Wade after the first of their two dinners at Citronelle, “the best dinner I have ever enjoyed in Washington.”

Repeating something I posted here last year. In a court affidavit (pdf), the FBI cited a document from Mitch Wade’s company, MZM Inc., that bragged of all the firm had done for a CIFA, the brand-new Counterintelligence Field Activity:

Wade boasted in 2002 that he could deliver money to CIFA from Cunningham and his other buddies in Congress (without mentioning that the money then came back to Wade in the form of contracts).

In a Nov. 8, 2002 presentation entitled “Benefits to CIFA from Congressional Mandates Initiative Support,” Wade trumpeted one item: “Delivery of over $67.62M in the last three fiscal years over budget – no other entity within the CIFA family has accomplished this task.”

On a page entitled “Election Impact on Congressional Mandates,” Wade wrote listed a number of politicians. The list included Randy “Duke” Cunningham, Duncan Hunter, Majority Leader Tom DeLay, Speaker Denny Hastert, Jerry Lewis, Allan Mollohan, John Murtha, David Weldon, and Bill Young; Senators Robert Byrd, Larry Craig, Orin Hatch, Daniel Inouye, Trent Lott, Jay Rockefeller, and Richard Shelby.

At the bottom, Wade wrote “Election enchanced MZM Inc….Thus CIFA position.”

Well, I was wrong about nobody caring about yesterday’s post about defense contractor Mitch Wade. The Washington Post ran a story today on the sentencing memo, highlighting the congressional corruption angle.

Wade is being sentenced next month for paying $1.8 million in bribes to former Rep. Randy “Duke” Cunningham in return for government contracts. He’s one of the more interesting, but least known characters in the whole sordid saga.

Wade was once at the top of D.C.’s social strata. As outwardly successful as he seemed, Wade was inwardly troubled. He had classic symptoms of mania — he was equally smart, gracious, and charming as well as ruthless, relentlessly ambitious and control-obssessed.

At MZM Inc., his defense contracting firm, Wade opened mail addressed to his employees, screened employee e-mails and railed about those who received personal messages in their MZM accounts. No detail was too small for him to obsess about and nothing got done without his say-so.  As I wrote in my book:

It occurred to more than one employee that Wade had deep psychological problems. His paranoia, his compartmentalization, and his secrecy were all traits that many of his employees recognized from their experience in the intelligence world. Suspicion and paranoia were a job hazard, particularly in the spy-vs-spy of counterintelligence that was MZM’s specialty. Too many much time spent wondering if your colleagues were really your enemies did tend to make people a bit loony.

In a wonderful essay in The New Yorker, writer John Le Carre, a former spy himself, says that madness is endemic to the intelligence world “hard to detect and harder still to eradicate.” The most famous case was James Jesus Angleton, a “deranged CIA inpatient,” in Le Carre’s words, who nearly destroyed the spy agency in his quest for a Soviet mole that he could never find.

There were rumors that Wade was connected to some sort of covert intelligence network, which might explain all the paranoia. I heard stories of secret passageways, safehouses and nasty covert ops, but it was never clear to me that this was anything more than a product of Wade’s massive ego, a fantasy that he was playing at the spy world’s “great game” and not just acting like a shabby huckster.

At the same time, I’ve been thinking about the glowing fitness reports (here and here) Wade received from John McConnell, the director of national intelligence. And I can’t help but wonder whether the attributes in Wade that I think might earn him time on the psychiatrist’s couch might actually be viewed as useful traits in certain corners of the intelligence world.